Asset managers would resist a move by regulators in Europe to enforce socially responsible investment criteria through legislation, research indicates.
CFA Institute found high levels of opposition to any regulatory requirement for environmental, social and governance (ESG) criteria to be factored into investments. Nearly 80% of investment professionals in Luxembourg were opposed to any such measure, while 71% in the UK and 69% in Germany opposed it.
CFA Institute, a professional body, carried out the research into attitudes towards ESG among its members in light of the European Commission Action Plan on Sustainable Finance.
The action plan, which is intended to make Europe’s financial system more supportive of the EU’s climate and sustainable development agenda, was unveiled in March.
Svi Rosov, director of capital markets policy at the CFA Institute, said: “These ESG factors are part of the standard mix when analysts are assessing their portfolio investments, yet there is great concern whether the regulator should legally mandate ESG or any other factors considered by the investment profession.”
Although the majority of investment professionals in the EU already use ESG factors in investment analysis, this is mainly around governance aspects. However, CFA Institute said that professionals are also now “routinely considering” the environmental and social risks of a company’s products and behaviours as part of a fundamental analysis.
The majority of professionals also said:
• Any mandate for firms to consider ESG factors during investment analysis should not translate into forcing an investment manager or client into an ESG investment policy.
• A legislative mandate should not override what a client wants and instructs the investment manager to consider as relevant investment factors.
Yet there was little consensus on whether ESG factoring should be formally added to an investment manager’s legal, fiduciary duty. Respondents in the Netherlands returned the only majority in favour (57%) and respondents in Spain gave the least support (34%).
The findings are published in a CFA report, ‘The evolving future of ESG integration in investment analysis’.
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