Green and sustainable investing: why asset managers need clear ESG definitions to aid fund sales, quash greenwashing
- Lack of clarity about labels and data places a growing compliance burden on asset managers, says Fidelity’s head of sustainable investing
- Company has had to hire 180 analysts to identify comparison baselines and evaluate portfolio companies’ ESG performance
A lack of globally consistent and clear definitions of what “green” and “sustainable” actually mean when it comes to projects and investment products has imposed extra burdens on asset managers struggling to meet compliance requirements, according to Fidelity’s head of sustainable investing.
Insufficient regulation of environment, social and governance (ESG) data and ratings providers also heightens concerns about greenwashing, the act of making unsubstantiated sustainability claims.
“If you are selling a fund as a green fund, that means very different things depending on what country you are from,” said Gabriel Wilson-Otto, head of sustainable investing strategy at Fidelity International, which manages more than US$700 billion of client assets globally.
This creates complexity and limits scalability for asset managers, he said during a panel discussion at the Hong Kong Investment Funds Association conference on Monday.
Globally, managed sustainable funds amounted to US$2.7 trillion at the end of March, of which US$89 billion were domiciled in Asia, according to data from Morningstar. The global figure was just over US$2.5 trillion at the end of last year.