Is your ESG fund manager asking the difficult questions?

NOTE: This post is more than 12 months old, and the information contained within may no longer be accurate.

It is has been widely reported that so called “ESG funds” (Environmental, Social and Governance) or “ethical” funds have been dumping the fashion retailer Boohoo.

The reason for this is modern slavery accusations which have been reported in the media and general failure to engage in conversations had by these investors.

For me this is an example of my opinion that many ESG managers are paying lip service to their due diligence, and I query how “fast” or “disposable fashion” (evidenced by “wear once” £5 dresses), could ever be classed as “Environmental”?

The whole topic of ESG is complex and with a greater number of investors expressing EGS considerations as part of their investment scrutiny, I am worried that both fund managers and advisers see ESG as more of a box-ticking exercise than attaching due weight to client preferences.

There are several examples of this and I think Boohoo is a great one, but there are other simply tacking “green” or “sustainable” on the end of their conventional funds, more of a marketing exercise than any true intention to scrutinise or engage with the companies they invest in.

Indeed, the more you understand about the topic of ESG the harder it is to come up with any concrete solutions to the above issues for several reasons:

  • That ESG decisions are wholly personal and one person’s “ethical” could be another person’s “unethical”.
  • That managers and advisers alike are not sufficiently scrutinising funds that they allege to meet ESG criteria.
  • That in some cases the fund management industry have seen monies move away from “active” management, due to a history of declining value and ESG is a way of them asserting increased power in this area.
  • That reporting of events such as climate change and the Coronavirus have lead this topic to be more relevant amongst a broader audience.

It is twenty years since I started in financial services and the main reason I was attracted to my employer at the time (Friends Provident) was they were a company that had pioneered ethical investing in the UK, so this is a topic that I have followed with interest over the years.

I have strong views on what does and does not work for me and I take great care not to impose these views on our clients.

ESG investing and ethical investing is a topic that Wingate are passionate and knowledgeable about, but with this knowledge comes an acute awareness that there are no easy answers.

If this type of investing is a consideration for you personally, or as a trustee, we would be delighted to speak to you further.




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