Just over half – 53 per cent – of fund managers surveyed by
Hedge Fund Research said they incorporate
ESG factors or risks into
their investment process – a total of 687 managers – while 47 per cent,
or 609 fund managers, said they did not.
Over the course of 2020 and 2021, HFR quizzed hedge fund managers in
their database on the incorporation of ESG into their investment
processes.
Ahead of the COP26 summit in Scotland – which is seen as a pivotal
moment in the fight against climate change – HFR’s survey found that
three-quarters of funds engage with their portfolio companies on ESG
issues, while 25 per cent did not.
Meanwhile, 77 per cent of funds interview said they consider climate
change in their investment processes, while 23 per cent did not.
As impact investing and sustainability themes have come into sharp
focus over the past decade, ESG investment factors have gained greater
prominence within the global asset management industry, with allocators
placing ever-greater scrutiny on how their portfolios and investments
meet the climate challenge.
A wide-ranging study by Deutsche Bank last year found that ESG
factors now shape the allocation decisions of roughly two-thirds of
hedge fund investors.
A number of high-profile hedge fund firms – including Sir Chris
Hohn’s TCI Fund, Caxton Associates, and Man Group – have emerged as
vocal ESG advocates. Earlier this summer, US activist hedge fund Engine
No. 1 secured three members on the board of ExxonMobil as part of its
push for clean energy reforms at the US oil giant.
However, in a separate survey carried out earlier this month by
EisnerAmper, just 17 per cent of hedge fund executives said their firm
had an ESG portfolio. They pointed to a lack of standardised reporting
and datasets (48 per cent), sourcing quality investment opportunities
(20 per cent), and dispelling the notion of poor returns (17 per cent)
as the biggest barriers to integrating ESG into their funds.