Different people have different investment aims, goals and attitudes to risk, which is why there is no ‘one size fits all’ way to run sustainable, responsible and ESG funds.
Examples of how and why Investment Managers approaches vary:
Different funds have different investment objectives
- Asset types vary
- Geographic areas vary
- Different sustainability / ethical / ESG policies, strategies, criteria and objectives
- Choice of industries/companies differ
- May or may not aim to deliver positive impacts
- Different benchmarks / peer groups
- Focus on different timescales – some fund managers are more long term than others
Different funds have different SRI, green /or ethical strategies
- Some have narrowly defined themes or strict ethical screens which can narrow investment choice
- Some have SRI/ESG strategies because they believe they will bring performance benefits – others have SRI strategies that dictate where they can invest and are driven by pre-set ‘ethical’ policies rather than analysis of changing business environment
- Some have broad themes or apply best of sector approaches – or track a named index
- Engagement only’ or ‘Responsible ownership’ strategies do not directly alter where a fund can invest
Different funds use different SRI research and focus on different areas
- Some funds carry out their own significant levels of in-house SRI research which can mean they go ‘deeper’ into some issues than other fund managers. This can shape fund managers’ understanding of companies and issues.
- Some funds buy in research and are therefore likely to be similar to other funds that use the same research
- Some fund managers have higher levels of expertise in specific areas which can shape their views and decisions.
They have different clients – who want different things.
- What clients want may influence fund manager strategy if the critical mass of clients with a particular view is significant.
Fund managers work for different organisations.
- Who a fund manager works for may influence where they invest particularly if there is a house view on particular issues, sectors or companies. Senior management commitment will also impact the resources available for SRI and therefore the likelihood of a ‘bespoke’ strategy. Strategies may also be directed by a groups CSR (Corporate Responsibility) strategy.
Adviser tip:
Different funds suit different people. This diversity offers advisers the opportunity to demonstrate the value of seeking professional advice and can bring ‘holistic’ financial planning to a whole new level.