Is environmental, social, and governance investing taking over — or is it just a lot of greenwashing?
Fund buyers — the investment professionals responsible for evaluating and selecting funds for wealth management firms, insurers, defined contribution providers, and others — weighed in on the future of ESG in a new survey conducted by CoreData Research.
Out of the 200 fund selectors surveyed globally, 63 percent predicted that all funds would incorporate environmental, social, and governance factors in five years, the research firm said in a statement this week. This belief was more prevalent among fund buyers in Europe and the U.K., with 72 percent and 73 percent expecting ESG to become universal, respectfully.
At the same time, the vast majority of respondents expressed concerns about greenwashing, or fund managers “only paying lip service to ESG,” according to CoreData. Eighty percent of fund buyers globally said they expected greenwashing to become more common as demand for ESG increases.
In addition, 28 percent of respondents said they believed ESG is a market bubble that will eventually burst. This view was most common in Asia, where 50 percent of respondents warned of an ESG bubble.
“These findings likely reflect a view that there is a lot of hype around ESG rather than a belief that it is a passing trend or fad,” said Andrew Inwood, founder and principal of CoreData, in the statement. “ESG is clearly a megatrend that is here to stay.”
According to Inwood, Covid-19 has fueled interest in sustainable investing, with the CoreData survey showing that 60 percent of fund selectors globally have become more focused on ESG since the start of the pandemic. However, the survey found a “wide regional disparity” in ESG commitments, with 81 percent of U.K. respondents reporting that they made ESG more of a priority, versus 42 percent of North American fund buyers.
North American respondents were also less likely to believe that sustainable funds outperformed: Only 31 percent said that ESG improved investment performance, versus 50 percent of global respondents.
Still, fund buyers in North America and globally believed that active managers would benefit from the rise of ESG. According to CoreData, 75 percent of global respondents and 69 percent of North American fund selectors believed active managers could capitalize on demand for sustainable investments.