Unigestion Survey: Interest in ESG Rising Among Alternative Asset Managers

Jul 25 2016 | 11:12pm ET

A new survey from Swiss asset manager Unigestion suggests alternatives managers are split on the benefits of ESG, although hedge fund and private equity managers are showing an increasing interest in the investment style.

Nearly half of hedge funds surveyed are now showing some interest, according to the survey – up from 40% last year. Unigestion surveys managers it invests in every year for their attitudes regarding inclusion of environmental, social and governance criteria to investment processes. 

Other key findings from the survey:

  • More hedge funds are considering the value of ESG. Last year, 60% of hedge fund managers were ‘reluctant’ to consider ESG as part of their strategies, while this year only 53% of hedge fund managers were in the ‘no interest’ category. 
  • 30% of hedge funds managers surveyed were actively incorporating ESG into their strategies.
  • While there were a number of strategies represented in this sample, the clear leaders in ESG adoption were Arbitrage managers – 67% of which had an active ESG strategy. Tactical traders (including commodities, managed futures and global macro strategies) find it the most difficult to implement ESG into their investment processes because of the nature of the strategy.
  • Small and large firms also diverged in their approach to ESG, with large firms, i.e. those with more than $10 billion in AUM, more likely to have in place a formal ESG policy. 
  • More hedge funds are becoming signatories to the UN PRI. Last year, only 13% of hedge funds surveyed were signed up to the principles, while this year, 20% had signed up. As the practicalities of incorporating ESG into investment strategies is still a stumbling block for many managers, the PRI is spearheading a working group to create a standard ESG due diligence questionnaire for hedge funds.
  • Private equity managers are on the whole more advanced than their hedge fund counterparts in ESG adoption. This year, 42% of private equity managers achieved ‘advanced’ or ‘leader’ status, up from 29% last year, and the proportion of ‘reluctant’ managers fell from 27% to 21%. 
  • The survey shows variation between private equity managers linked primarily to size, geography and strategy – with 95% of large firms showing interest in ESG compared to only 63% of small firms, and almost double the number of European managers than U.S. managers showing interest at 94% vs. 52%, respectively. 
  • The clear private equity ESG leaders are buyout managers, with 45% scoring ‘leader’ or ‘advanced’ status, another 29% with ESG policies in progress, and only 10% of managers showing reluctance. By comparison, 46% of venture capital managers are reluctant to introduce ESG policies

“We are still seeing too many hedge fund and private equity managers dismissing ESG as a cost burden, incompatible with their strategies, or a mere marketing exercise,” said Eric Cockshutt, responsible investment coordinator at Unigestion, in a statement. “However, the experience of many managers is that ESG adoption is both feasible and beneficial to clients and the company’s overall reputation for taking seriously its environmental and social responsibilities.

Unigestion’s full ESG survey can be viewed here

Founded 45 years ago, Geneva-based Unigestion manages approximately $19.5 billion across equity, hedge fund, private asset and cross-asset solutions for institutional and high net worth investors, including equities, alternatives, private equity and multi-asset strategies.

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