Hedge funds less reluctant on ESG

The number of hedge funds with “no interest” in socially responsible investing is falling.

Unigestion said more hedge funds are considering the value of environmental, social and governance (ESG) investment.

Last year, a Unigestion survey of ESG activity in the alternative investment world found 60% of hedge fund managers were “reluctant” to consider ESG as part of their strategies, whilst this year only 53% of hedge fund managers were in the “no interest” category.

Unigestion, a Geneva-based asset manager, said 30% of hedge funds managers surveyed were actively incorporating ESG into their strategies.

Managers with ‘arbitrage’ strategies were the highest adopters, while 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.

One of the managers surveyed, Winton Capital, said that its approach to ESG encompasses broad initiatives such as sponsoring research prizes. In addition, its headquarters are a certified Low Carbon Workplace, one of only eight in the UK.

Private equity managers are on the whole more advanced than their hedge fund counterparts in ESG adoption, said Unigestion. 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%.

Eric Cockshutt, responsible investment coordinator at Unigestion, said: “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.

“The experience of many managers however 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.”

©2016 funds europe