[ U P D A T E ]
Action lags ambition in ESG allocation , finds Pershing alternatives survey
Allocators are on the whole yet to adopt a systematic approach to ESG investment , survey finds .
recent survey by BNY Mellon ’ s Pershing of more
A than 70 hedge fund allocators suggested that considerations for investing in ESG strategies are yet to coalesce around a common set of standards at an industry level . While there is broad recognition of the opportunities available and interest from allocators in ESG investing , many have yet to follow through with strategic capital deployment . Some 30 % of allocators surveyed are allocating opportunistically , with only 4 % doing so via Asset Allocation buckets . The goals of ESG investing also differed significantly across the survey sample : 30 % were primarily interested in impact , 20 % in return enhancement , and 15 % in faith-based objectives . While the umbrella notion of ESG covers a multitude of concerns , the survey found that at a more granular level allocators are increasingly interested in air pollution reduction , plastic use reduction , water scarcity reduction ( almost 10 % each ) and talent development and retention ( 11 %). Allocators surveyed acknowledged that increased expertise on ESG is needed to be successful . Only 13 % of survey participants said they had an expert level of expertise , 31 % an intermediate level and 7 % a base level with almost half of allocators admitting they had “ no level of expertise ” in the subject . As a result , most allocators are not currently in a position to measure the success of their ESG initiatives . Given the breadth of ESG concerns , the requisite level of expertise is hard to define . “ These are giant fields of study , even if you just take the E alone ,” says Dave Shalom , director , capital introductions , BNY Mellon | Pershing , who conducted the study . “ When you ’ re on the buy side , people are trying to sell you stuff . How do you evaluate whether it fits your investment criteria ?”
He gives the example of alternative fuels . “ You really have to study to understand the relative impact of different mixtures , for example , mixtures of corn-based and petroleum-based products , to get something more environmentally friendly but still be able to fulfil their basic function .”
In prime brokerage , says Shalom , “ Our clients are investment managers , some of whom have ESG products or strategies . On the other side we work with professional investors looking for strategies that our manager clients may or may not have . We wanted to understand where the market actually is for ESG , how serious the demand is , and what investors actually care about .”
14 Global Custodian Fund Services Annual 2022