Are sustainable fund managers any different?
Subscribe to enjoy similar stories. Advocates of sustainable investing believe it could be the key to lowering carbon emissions and creating a more just society, claiming that asset managers can prod companies to do good by incorporating environmental and social factors into their investment decisions. New research, however, suggests such expectations are probably overly optimistic.
The asset-management industry has made a significant outward show of support for sustainable investing in recent years, with thousands of firms signing the U.N. Principles for Responsible Investment and adding “sustainable" to their fund names. How these proclamations and labels affect how their managers actually invest, however, isn’t always clear.
To find out, I joined forces with Tom Gosling of London Business School and Dirk Jenter of the London School of Economics to survey 509 equity portfolio managers—290 from traditional funds and 219 from funds marketed to the public as sustainable. Our study found that asset managers—regardless of the type of fund they run—approach investment decisions in much more similar ways than many people realize. For example, most of the portfolio managers we surveyed—including a majority running sustainable funds—said they wouldn’t voluntarily sacrifice even one basis point (0.01 percentage point) of return to advance environmental and social (ES) goals, citing their fiduciary duty to clients.
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