How to become an ESG asset manager

PwC report sets out seven steps for integrating ESG

ESG investing will account for more than 50% of Europe’s assets under management by 2025, according to a study by PwC, so how can firms adapt to these changes?

In The growth opportunity of the century, PwC sets out the drivers included for it to reach that figure, namely regulatory overhaul, the outperformance of ESG, increasing investor demand and societal shifts.

But despite this shift to ESG, the study finds just 14% of asset managers plan to stop launching non-ESG products next year. PwC therefore makes seven recommendations to firms starting their journey into ESG investing:

1. Reposition your organisation – A strategic overhaul and plan to integrate ESG at all levels of the organisation is needed in order to restructure as a sustainable asset manager.
2. Be credible and consistent – Up transparency, make sure to examine internal ESG factors as well as those at portfolio companies and make sure the approach is consistent.
3. Integrate ESG into products – Decide which SFDR category to target, and then decide how to implement ESG indicators in investment risk processes, how to structure and rationalise fees, how to elucidate and market ESG efforts.
4. Get around data hurdles – ESG data problems can be addressed by engaging more with portfolio companies and use external data sources.
5. Develop an ESG risk management framework – Adopt and implement expert risk identification and management practices, monitor and evaluate portfolios and reinforce ESG compliance.
6. Report to investors – Go above and beyond the minimum requirements to keep up with regulation.
7. Educate – Upskill staff on ESG and recruit ESG expertise.