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Hedge funds question how green investing will impact assets

hedge funds esg green investmentsHedge fund investors are likely to demand information on ESG performance every 18 days, according to research that reveals concern in some parts of the industry that green investing will be good for their business.

The majority of firms surveyed did feel ESG investing would increase assets under management (AUM) in the next five years – but nearly a third of the 100 hedge fund CFOs surveyed internationally did not.

Fifty-seven per cent said AUM would increase if ESG were included in investment processes; 29% said AUM would fall.

The research, published by fund administrator Intertrust Group, found the most scepticism in the US. Although nearly half of the CFOs in the US (49%) said ESG would gain the industry more capital, 30% said it would lead to outflows.

In contrast, CFOs in Asia were more optimistic, with almost three quarters expecting AUM to increase.

Intertrust said its study showed that CFOs expected investment reporting demands on ESG to increase “exponentially” over the coming five years. Over one-in-four CFOs were expecting investors to require live or daily updates on ESG performance data by 2026. About another quarter said reporting would be weekly and, overall, investors will on average expect to receive updated strategy level ESG performance data every 18 days.

Jonathan White, global head of fund sales at Intertrust Group, said: “Demand from investors for reassurance over the ESG credentials of their investments has grown rapidly, but there is a lack of consistency and unity over how it should be measured and verified.  The frequency with which hedge funds trade makes it even harder for them – versus other investors that may hold positions for a long period – to conduct the due diligence necessary to ascertain how sustainable an investment is.”

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