The importance of ESG investing for alternative asset classes is set to escalate, according to a 2021 Funds Europe/Jersey Finance survey. Ninety-five percent of respondents to the survey said they considered ESG factors to be important for alternative investment strategies, with 47% deeming them to be critically important.
This near unanimity represents a significant shift in opinion from last year when 26% of respondents remained sceptical about the importance of ESG factors for alternative investment strategies. Only 32% of respondents to last year’s survey deemed ESG factors to be critically important for alternatives.
“The survey response says it all – only 5% of respondents feel that ESG factors are not important or not relevant to alternative investment strategies,” says Leanne Wallser, group partner at Walkers. “It would be interesting to wind the clock back two years to see what the response rate would have been then. My strong feeling is that the numbers would have been quite different.”
When it came to identifying which asset classes would see the greatest impact from ESG factors, respondents were clear that infrastructure would be the asset class most affected. Eighty-one percent expected a high impact from ESG in the infrastructure sector.
“Unsurprisingly, given the emphasis on infrastructure spending and the push for public and private sector stimulus funding to #BuildBackBetter, 81% of respondents felt that infrastructure spending would be affected by ESG factors,” says Wallser.
More than 80% of respondents also expected a high or medium impact from ESG factors in the real estate and private equity sectors. The outlier was the hedge funds sector. Survey respondents did expect ESG factors to have an impact on hedge funds, but the majority – 82% -- thought it would only be moderate or low.
The trend, nonetheless, is for ESG factors have an increasing impact on hedge funds in the view of the survey respondents. Fifty-four percent of this year’s respondents expected a medium impact on the hedge fund sector compared to 42% last year, while 18% of this year’s respondents expected a high impact compared to 16% last year.
“As expected, high impact is anticipated for private equity and real estate but what is also relevant is that, even for the sector felt least likely to be impacted by ESG considerations – hedge funds – the cumulative response was that 72% of respondents felt there would be a high or medium impact,” says Wallser.
The survey results reflect both the rapidly growing importance of ESG across asset classes and Jersey’s evolving role as a fund jurisdiction. Assets tends to congregate in certain jurisdictions, and Elliot Refson, head of funds at Jersey Finance, believes Jersey could capture ESG assets.
“I believe that there is an opportunity for a single jurisdiction to come to the fore in the ESG space and I believe that jurisdiction will be Jersey, especially given our baseline of stability,” he told a Funds Europe webinar in April.
*The full results are in our report “Alternatives Future Directions”. Read the report here.
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