Hedge fund managers are increasingly adopting ESG criteria in their investment decisions but most are still reluctant to do so, according to a survey by asset management firm Unigestion.
Forty percent of hedge fund managers now incorporate ESG criteria to some degree in their investment strategies, an increase from 25 percent in 2011, while 60 percent remain reluctant, according to the survey. Thirteen percent of those surveyed are considered ‘leaders’ in the use of ESG criteria, an increase from 3 percent in the 2011 survey.
‘It is increasingly widely recognized that incorporating ESG criteria into investment processes can have a positive impact on a portfolio’s risk-return profile, through both generating opportunities and reducing risk,’ says Eric Cockshutt, responsible investment co-ordinator at Unigestion. ‘Although there has been clear progress since our last survey three years ago, the adoption of ESG criteria is still at an early stage in the hedge fund universe.’
The survey also finds that 70 percent of hedge fund managers in the US are reluctant to use ESG criteria in their decision-making processes, while a little more than 50 percent in Europe say the same. In the 2011 survey, more than 90 percent of managers in the US were reluctant to use ESG criteria, compared with around 60 percent in Europe.
Overall, 44 percent of hedge fund managers specializing in equities investment are reluctant to use ESG criteria, compared with 56 percent in 2011. Two thirds of managers specializing in tactical trading are reluctant, down from 85 percent in the previous survey.
The study finds that private asset managers are more likely to use ESG criteria, with almost three quarters (73 percent) doing so. Large private asset managers are even more likely to use them, with only about 5 percent expressing reluctance, compared with about 55 percent of the managers from small firms.
