An ESG strategy can only be taken seriously if the data that underpins it is made available, selectors argue.
A solid understanding of fund manager’s ‘DNA’ is vital to effectively select environmental, social and governance (ESG) funds because of the lack of standardisation in the sector, fund buyers believe.
«One of the biggest challenges we face when selecting ESG funds is putting together an accurate understanding of the analysis and criteria that underpin a group’s ESG ratings,» said Matthias Hänsel, a senior portfolio manager at W&W Asset Management.
«There are many standards and fund groups don’t have to report everything they do – they can pick and choose,» he said.
«A fund manager with a genuine ESG strategy has to make their ESG data available.«
Inconsistent standards
Solventis portfolio manager Pilar Cañabate shared the view that inconsistencies in ESG reporting standards among asset managers provided a significant challenge.
«There are many standards and fund groups don’t have to report everything they do – they can pick and choose.«
«Most asset managers do not explain their ESG criteria well enough,» Cañabate said. «In general, funds will explain their investment objective and brand themselves ESG’ – but not explain how.«
Cañabate added that she did not rely on fund rating systems, such as Morningstar, because of the lack of standardisation.
«It’s difficult for us to compare funds so we demand quantitative and qualitative reports from the fund managers to understand their ESG investment process,» she said.