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80%... to 97%!!!... of Global Assets will be ESG Mandates by 2029 - Funds Congress, London

2/28/20 11:11 AM

Earlier this month, Castle Hall was pleased to attend the 9th Annual Funds Congress in London, hosted by Dechert, Carne and PwC.  The Congress has grown from 100 attendees at inception to over 1,500 this year, who met at the QEII Conference Centre next to Westminster Abbey and the Houses of Parliament. 

The biggest takeaway? The final panel members were asked to estimate the percentage of global assets that would be ESG related by 2030. Guesses ranged from 80% as a conservative estimate to 97% at the higher end.
 

Re-inventing Capitalism

The conference kicked off with a thought-provoking talk on "re-inventing capitalism", from acclaimed author and governmental advisor, Mariana Mazzucato. She lauded the opportunity for the finance sector to move to a “mission-orientated approach” to foster innovation in capital markets.

  • How can the asset management industry value long term progress - when our products operate on a daily or monthly NAV cycle, and corporations are driven by quarterly reporting?
  • Marianna stated that action was required from the Financial Community on sustainability and climate issues.
  • One observation from Mariana really resonated with the audience: “the more we talk about change the less it actually happens” – it was a clear call to action for everyone to make ESG issues Mission Critical.

CEO Panel: Threats and Opportunities

Next up we heard from an impressive CEO panel of Jennifer Johnson (CEO at Franklin Templeton) and Andrew Formica (CEO at Jupiter).
 
  • Jennifer spoke about a fundamental shift to Alternative Data, something Castle Hall has already blogged about (click here to read the post). She spoke specifically about how Franklin Templeton was continually evolving to incorporate new data sets.
  • Jennifer gave an example of the US personal loan market and how quickly borrowers have migrated online. This allows data and credit signals to be analyzed as never before.
  • Andrew spoke about the value of taking the time to plan effectively, to avoid having to react to circumstances beyond your control.
  • Andrew also spoke about his desire to hire a more diverse workforce, as an approach to increasing cognitive diversity to solve problems.

The panel confirmed the major shift in Europe to ESG strategies and assets. They all referenced record ESG inflows in Q4 2019 demonstrating a larger trend in the industry - which was a perfect segue into the afternoon panel. 

ESG and Diversity in Asset Management

Key observations from the panel on ESG and Diversity in Asset Management were:

  • The UK Stewardship Code will become a game changer for the UK market. London was highlighted as a key global centre for ESG asset management.
  • One participant referred to ESG as an “unstoppable freight train of momentum” in the finance industry.
  • The use of Alternative Data sources was again referenced as a huge potential alpha stream, this time to analyze and utilize ESG metrics as they became available and as data quality improves.
  • Board Diversity was again referenced, as a good social practice as well as an indicator of positive company performance.
  • Asset Manager diversity was emphasized, with PwC highlighting research that diverse venture capital firms will outperform monocultural, mono-gender counterparts.
  • The panel referred to the huge challenge in finding effective ESG Managers. It was further observed that the UN PRI has been inundated with new signatories and the obvious challenges associated with manager self-reporting.
  • The major issue of the EU Sustainable Action Plan was referenced along with the impending EU Taxonomy and Disclosure regulations. The panel also referenced the challenges of matching model portfolios with client preferences.
The panel also outlined the key challenges to projected growth in ESG portfolios:

  • Data Quality
  • Greenwashing
  • Time and resources

Wrap Up

The fund management and wider finance sectors are expected to undergo major changes, especially around ESG implementation. Paraphrasing Mariana Mazzucato, the challenge for our industry will be to make this huge ESG Mission a reality and for finance to support the major environmental and societal changes of this new decade.

Find out more about Castle Hall’s approach to ESG Diligence here.

Join the conversation about ESG due diligence on Linkedin here.

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