Fewer than one in ten professional fund buyers believe environmental, social and governance (ESG) criteria are key factors when selecting funds, according to a study.
Performance history was seen as the most important factor by 60% of fund buyers while only 7% said they saw ESG and sustainability criteria as crucial.
The UK and US led the way in terms of attaching the most weight to ESG – but only 10% and 9% respectively said they consider it key when selecting funds, according to the report by CoreData Research.
Craig Phillips, head of international at the market research firm, said: “The surprisingly small role assigned to ESG in the fund selection process may reflect difficulties evaluating the sustainable credentials of funds due to a lack of transparency and reported data.”
“While the market has seen a proliferation of ESG funds, there are growing concerns about so-called greenwashing,” he added.
After performance, global buyers point to investment philosophy (53%) and investment selection process (51%) as the next in importance when selecting funds.
Few buyers cited influence of manager tenure, asset manager reputation, and fund size as crucial.
“This shows how professional buyers are looking beyond those factors associated with the manager and are instead focusing on fund-specific dynamics. They are basing decisions around the particular investment approach and style and how successful it has been rather than the manager’s reputation and tenure,” Phillips said.
At a global level, just under 20% of the 200 fund buyers surveyed conduct a monthly comprehensive review of active managers, while 34% do so on a quarterly basis.
Professional buyers in the UK and Latin America were found to be keeping the closest tabs on active managers, while those in Europe and North America conduct less frequent reviews.
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