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‘Engagement’ is main ESG priority for institutional investors

Renewable Energy SmallThe European Fund and Asset Management Association (Efama) has found that engagement with companies is a primary priority for institutional investors applying ESG criteria to their portfolios.

In Europe, over 43% of the industry’s total assets under management (AuM) is dedicated to ESG-related engagement or voting policies, according to the report which analysed data collected through the course of last year. 

“While equity managers are the primary users of such strategies, making use of their voting rights, also managers of other asset classes (fixed income, private assets, etc.) are increasingly voicing their ESG expectations,” Efama said in a report. 

The trade body also highlighted that ESG exclusions are “one of the most basic and common” forms of ESG application, with nearly a third of European assets covered in the report applying this strategy. 

Exclusions often include investments that go against human rights, labour standards and international norms.

Tanguy van de Werve, director general of Efama, said: “The research confirms that a wide variety of sustainable investment approaches are followed, demonstrating the need to exercise caution when quantifying the true size of the European ESG market.”

Speaking with Funds Europe, Andrew Parry, head of sustainable investment at Newton Investment Managers, said one of the main challenges when engaging with companies is authenticity.

“There's always this major challenge of making sure you're not accused of greenwashing, so there is this balance between keeping it real and being idealistic. It's very easy to forget that our job is still to make clients money in a risk-adjusted way and in line with a benchmark,” he said. 

ESG engagement conversations have been picking up pace especially over the last couple of years, according to Carolina van Lamoen, head of Robeco’s active ownership team. “Investors around the world increasingly team up and join forces in their engagement dialogues towards companies.”

The assets under management covered in the Efama report include €12.5 trillion of investment fund assets and €11.4 trillion of mandate assets. The study involved 28 member associations, 60 corporate members and 24 associate members.

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