Asset managers need ESG mettle to win mandates

As sustainability increasingly becomes mainstream, manager selection will be based on their environmental, social and governance (ESG) policies and approaches, according to 2021 Greenwich Leaders: Continental European Institutional Investment Management report.

The report by Coalition Greenwich shows that as recently as 2019, many institutional investors were taking a go-slow approach when it came to ESG. However, the share of institutions including ESG criteria in manager selections jumped to 91% in 2021 from just 61% in 2019, with those in the Nordics and the Netherlands leading the charge.

Germany and Switzerland, which have trailed their counterparts, are playing catch up. The percentage of German institutions considering ESG in manager selections jumped to 87% in 2021 from 61% last year.

The rise was even more dramatic in Switzerland, where ESG usage spiked to 93% from 57% over the 12-month period.

Across Europe, the report found that nearly two-thirds of institutions now rank ESG criteria among the most important factors driving manager selection.

While the figure is the highest in the Nordics at 85%, even those countries that are lagging behind are at the over 40%.

“Institutions’ embrace of ESG criteria is being driven both by new regulations on sustainability, and by mounting demands from clients for sustainable investment practices,” says Mark Buckley, Coalition Greenwich Relationship Director.

This rapid adoption of ESG criteria has also led to a dramatic increase in institutional hiring activity.

The number of European institutions planning to hire a new manager in the coming 12 months rose to 30% in 2020 from 21% in 2019.

In traditional asset classes, institutions are issuing the most mandates in global equity, emerging markets equity, European equity, and global and European investment-grade credit.

However, the report found that demand will be strongest in alternative asset classes, especially infrastructure debt and direct private equity.

Looking at the broader picture, the report notes that in the face of the pandemic, institutions in continental Europe sought to minimise portfolio risk levels by directing assets into familiar European fixed income and equities.

“That strategy represented a pause in long-term plans to escalate allocations to specialty and international strategies in an effort to generate yield amid the now decade-long environment of low interest rates,” it added.

As for the best performers, Allianz Global Investors was named the 2021 Greenwich Quality Leader in Overall Continental European Institutional Investment Management, due to a combination of strength in multiple asset classes and market leading client service.

In Germany, the trio of Allianz Global Investors, PIMCO and Union Investment claimed the title of 2021 Greenwich Quality Leader. They distinguished themselves in a year of crisis with both highly ranked investments and superior service quality ratings.

In the UK, top honours went to Baillie Gifford which has long been recognised for its superior client service. The firm further widened the gap between itself and other managers with significant improvements in client service quality ratings during the volatile 12 months of 2020, according to the report.

©Markets Media Europe 2021

Stock exchanges’ listing rules are putting investors at risk

Global stock markets are financing companies which are sitting on three times more coal,...

Northern Trust launches digital assets and financial markets group

Following the growth of digital markets alongside the continued evolution of the traditional securities...

The CSRD is almost at the finishing line

Negotiators for the European Parliament and European Union governments reached a provisional agreement on...

Stock exchanges’ listing rules are putting investors at risk

Global stock markets are financing companies which are sitting on three times more coal,...

Northern Trust launches digital assets and financial markets group

Following the growth of digital markets alongside the continued evolution of the traditional securities...

The CSRD is almost at the finishing line

Negotiators for the European Parliament and European Union governments reached a provisional agreement on...