Asset Management: The courage to own your values
Asset management brands need to take back ownership of the positive contribution the sector can make in building a safe, sustainable future society.
Investment has a massive potential to do good. In the right hands it is the cornerstone of responsible development, social infrastructure and sustainability. This is not necessarily how the asset management sector has been viewed in the past, but that all looks set to change.
In Asset Management 2020: A Brave New World, PWC outlines the role the sector will play as it becomes a pivotal mechanism for investment. With banks moving out of some areas, asset managers will fill the void, also tackling critical issues such as ageing and retirement and the need for capital to support urbanisation and cross-border trade.
This is behind the explosion in chatter about environmental, social and governance (ESG) across the asset management community. But organisations have found themselves facing two challenges. Firstly, there is the importance of approaching a sensitive topic well – the asset management sector doesn’t just have to do something, it has to do the right something. And secondly, individual asset management organisations need to communicate what they are doing in a way that is credible and differentiating.
Evidence suggests that, thus far, these two challenges are proving tougher than the sector first imagined. Having grasped the need for sustainable, responsible investment, the community has forged ahead by hitching its wagon to a range of lofty ideals. The danger is that these can often sound like big claims backed by little evidence, and in many cases they bear little relation to the investment story at the heart of the business.
There’s also a worrying tendency, common across many other business sectors, for marketers to garnish everything with a wind turbine and solar panel or two, just because – you know – it’s environmental, isn’t it?
In the asset management sector the result is that investors are confused and commenters sceptical. There is little agreement on what ESG actually represents and it’s unsurprising, therefore, that many claims have led to cries of ‘Greenwashing’.
But above all, the asset management community’s involvement in ESG issues still has to be a means to an end, notably positive impact and positive returns. Our research would suggest that this is not yet perceived as credible. A recent survey conducted by Arthur London amongst professional investors across Europe indicated that ‘good’ investments are not seen as giving good returns. This lack of clarity and credibility means that no-one is talking to the end investor. Confusion reigns and the demand for these ‘good’ products remains untapped.
This isn’t to say ESG is not an issue worth pursuing, indeed the trend will continue and very shortly it will become essential. Nor is it a charity case. There is the potential for return if it’s pursued as a strategic investment rather than a nod to a trend. But the approach overall absolutely has to change.
First of all, the industry has to stop apologising for the mistakes of over a decade ago. With governance and active management, the asset sector should be proud of its contribution. Responsible active managers have always done a brilliant job of holding companies to account – in the interests of their investors.
Asset managers should also remember their brand should be the filter through which they communicate ESG and the method by which they can differentiate their approach to the subject. Through a successful brand story they can put investor benefits at the heart of their ESG strategy – and ESG at the heart of their brand. It’s simply a matter of bringing the good stuff into the light.
Companies such as Candriam and Sycomore evidence their claims with investors through ideas such as interactive voting behaviour dashboards and tangible funds like the Happy at Work fund from Sycomore and the recently launched Oncology impact fund from Candriam
The industry needs more asset brands to be bolder, stick their heads above the parapet and own the good that we know the sector has the potential to deliver. Opening the inner workings to scrutiny is scary, but if the brand is truly living its values and not merely hiding under a veneer of respectability, there really should be nothing to hide – and everything to shout about.