Survey: Adoption of ESG Criteria Growing Among Hedge Fund & Private Asset Managers

May 5 2015 | 11:50am ET

A new survey from Unigestion suggests investment managers are becoming more open to including environmental, social and governance (ESG) criteria in their selection processes.

Unigestion, an institutional asset manager providing risk-managed investment solutions, surveyed the hedge fund and private asset manager community in which it invests regarding their approaches to ES, according to a press release.

Although the results revealed that 60% of hedge fund managers were still reluctant to introduce ESG criteria into their investment approach, this is a big improvement over the results from the company’s last survey in 2011, when 75% of managers were reluctant. 

Meanwhile, the percentage of managers that do incorporate ESG criteria has increased significantly from 25% to 40% over the same time span.

Private asset managers were surveyed for the first time this year, and show greater willingness to incorporate ESG criteria than their hedge fund counterparts. Only 27% of private assets managers surveyed said they were reluctant to adopt ESG criteria. 

The survey also showed that ESG adoption varies according to hedge fund strategy.  A quarter (25%) of equity-related managers (i.e. long-short equity, equity market-neutral, etc.) were deemed ESG “leaders”, compared to only 5% of tactical trading managers engaged in such strategies as global macro, CTA, and commodities strategies.

Among private asset managers, the survey showed buyout managers place greater importance on ESG than venture and growth or special opportunity managers, with only 11% indicating reluctance to incorporate ESG criteria compared to 60% and 63% respectively.

Eric Cockshutt, Responsible Investment Coordinator at Unigestion, said: “It is increasingly recognized that incorporating ESG criteria in investment processes can have a positive impact on a portfolio’s risk-return profile, both through generating opportunities and reducing risk.” 

“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. Private assets managers are much more advanced, as ESG policies are increasingly being considered as a driver of value creation amongst private equity investors,” he added.

The survey also showed European hedge fund and private asset managers are more likely to be interested in ESG than their U.S.-based counterparts, while larger participants in both sectors are more likely to adopt ESG investment approaches than their smaller peers. 

Unigestion said it expects further progress in ESG inclusion over the coming years as the impact of ESG becomes more widely recognized and greater pressure is applied by investors for their managers to include ESG criteria when choosing portfolio positions.

Geneva-based Unigestion was founded more than forty years ago and had $17.8 billion in assets under management as of December 31, 2014. 

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