Investor appetite for ESG (environment, social, governance)-focussed funds is reaching new heights, fuelled by a combination of the asset class’ perceived performance benefits; regulatory intervention; and growing fears about stranded asset risk. According to Morningstar data, ESG funds accumulated $139.2 billion in net inflows during the second quarter of 2021, bringing total AuM (assets under management) to $2.3 trillion.1 Following COP26, 220 asset managers representing $57 trillion in AuM – signed up to the Net Zero Asset Managers Initiative – in what is further indicative of the industry’s commitment to ESG.
Amid the ESG asset class’ strong growth, regulators – particularly in the UK- are keen to ensure standards remain high – following growing concerns about potential greenwashing. Greenwashing is a problem which the IIMI [Independent Investment Management Initiative] – together with its members – is looking to counter. IIMI recently polled its membership, which is comprised of leading independent asset management firms from the UK and Continental Europe, to gather their views on the recent steps taken by the UK’s Financial Conduct Authority (FCA) around ESG.
- IIMI fully supports the FCA’s guiding principles and proposals to make TCFD reporting mandatory as it believes this will root out greenwashing.
- The UK must carefully consider the unintended consequences of potential overlap and divergence with other ESG regimes.
- With more markets increasingly adopting ESG legislation, an element of standardisation is required, otherwise, it could create further confusion. This is something that IIMI is willing to engage with regulators about.