Asset manager participation in sustainability initiatives is growing quickly but “does not always correlate with better outcomes”, sustainable investment research firm Worthstone has revealed.
In a new report – Are Investors Taking (not just Talking) the Initiative? – the business analysed 28 major sustainable investing initiatives and their adoption by over 100 global asset managers offering sustainable funds to UK retail investors.
It found that, despite recent high-profile withdrawals, participation by asset managers is still skyrocketing, indicative of the continued interest in sustainable investing.
It also revealed that climate-change initiatives account for nearly half of the schemes available.
Analysis of funds managed by signatories of climate-change initiatives such as Climate Action 100+ and Net Zero Asset Managers show below-average carbon footprints.
Meanwhile, funds managed by B Corps and asset managers adopting the Net Zero Carbon 2030 target score highest on Worthstone’s composite impact rating.
But adoption by asset managers is less than 10%, which is the lowest level of participation across all initiatives.
Additionally, involvement in some initiatives does not correlate with improved sustainable investment outcomes.
Worthstone lead analyst Kit Leahy said: “There’s been an explosion in sustainable investing initiatives, but participation doesn’t guarantee greater impact.
“We encourage investors to look beyond the labels. By tracking the impact of initiatives, we’re beginning to unpack which initiatives are correlating with better outcomes…and which aren’t.”
In November last year, the Financial Conduct Authority published its Sustainability Disclosure Requirements (SDR) consultation policy statement.
The main aim behind the SDR is to “improve the trust and transparency of sustainable investment products and minimise greenwashing”.
As part of this, the FCA is bringing in four labels: ‘sustainable focus’, ‘sustainable improvers’, ‘sustainable impact’ and ‘sustainability mixed goal’.
The aim of these is to help investors and advisers determine which funds and investments are genuinely sustainable.
Worthstone chief executive and founder Gavin Francis said: “With SDR taking off this year, it’s never been more important to assess asset-manager engagement in the industry.
“SDR is being seen by some as an asset-manager headache to start with, but it’s quickly going to become an adviser headache if firms don’t look closely at what asset managers are doing (rather than what they say they are doing), especially with the introduction of the anti-greenwashing rule incoming on the 31 May.
“Tracking these initiatives over time, we can help advisers by looking beneath the marketing of asset managers.
“While potentially some asset managers’ involvement in these initiatives is not backed by tangible action, they provide the industry with an opportunity to hold the signatories to account for improvements over time rather than providing an instant fix.
“It may be the laggards who need these initiatives the most, and evidence of improved outcomes may take some time to filter down.”
