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Asset Allocation

ESG Grows More Popular with Asset Managers

Some 75% of asset owners and 62% of asset managers hold ESG funds, BNP Paribas study says.

By Larry Light

The environmental, social, and governance (ESG) movement is gaining more  traction with asset owners and managers. A BNP Paribas study found that 75% of owners and 62% of managers held ESG funds as a quarter or more of their investments last year.

That’s compared to 48% and 53% in 2017. The biggest barrier to using ESG wasn’t its cost but rather a lack of tools to assess investments, the survey said.

ESG seeks shares in companies that embody a range of the concept’s values, often corporate tax transparency, climate change, gender diversity, executive pay, living wage expectations, and board responsiveness.

US firms are ahead of the rest of the world in embedding ESG capabilities within their organizations, with 29% of American participants reporting that ability, versus 23% globally. US activist funds like Jana Partners are catalysts for ESG. Jana teamed with the California State Teachers’ Retirement System to persuade Apple to address child dependence on iPhones, the report said.

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There’s a lot of evidence that ESG is spreading as a credo among investors. A $23 billion Dutch pension fund, Pensioenfonds Detailhandel, last month announced that it was axing a third of the corporate stock in its portfolio, in keeping with ESG precepts.

And a church group, including denominations like the Church of England and the Methodist Church, also in March said it was pressing harder to get FTSE 350 companies to adopt ESG goals, which the group felt was proceeding too slowly.

Companies with high ESG scores in the eurozone posted annualized returns of 6.6% from 2014-2017 versus an annualized loss of 1.2% three years before, according to a study by French asset manager Amundi.

The Paribas study also discovered that two-thirds of firms are adopting policies set by the United Nations’ Sustainable Development Goals statement.

Related Stories:

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Home > News > Risk > Consolidation Among Top Priorities for UK’s PLSA
Risk

Consolidation Among Top Priorities for UK’s PLSA

Pension industry trade group releases four-year work plan.

By Michael Katz

The UK’s Pensions and Lifetime Savings Association (PLSA) has released its four-year work plan, and consolidation is among the main themes the trade group will focus on.

In the outline for its plan, the PLSA said that because larger pension plans tend to have higher quality and performance, it welcomes the current trend toward consolidation. It said it is playing a major role in the development of defined benefit superfunds, and estimates they could increase security for 11 million members. However, the PLSA also said that scale should not be pursued as an end to itself as smaller plans can also deliver some or all of the same benefits as large ones.

In addition to consolidation, the PLSA is focusing on three other major themes: well-run plans, effective engagement, and adequate contributions.

The focus on well-run plans will cover cost transparency, value-for-money, sound investments, and stewardship.  Specific work areas include the Cost Transparency Initiative, which is a partnership among the PLSA, the Investment Association, and the Local Government Pension Scheme (LGPS) Advisory Board to implement industry standards to improve transparency in investment costs and charges. 

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Work in the area of effective engagement will include developing quantifiable saving targets to help the industry communicate people’s likely lifestyle in retirement and help them understand the impact of savings decisions. The PLSA is also helping develop the Pensions Dashboard and Simpler Annual Statements to help people understand their savings.

And in its focus on adequacy, the PLSA’s aim is to increase auto-enrollment contributions to 12% by 2030, while taking into account the affordability of higher contributions and widening the scope of automatic enrollment. It will also introduce the new Pension Quality Mark Standards, which will reward well-run plans that offer 12% contributions.

“The defined benefit funding regime will be another specific focus of the PLSA over the next four years,” the association said. “2019 is set to be a particularly important year for DB funds with Parliament debating a new Pensions Bill which will give greater powers to The Pensions Regulator.”

The four-year plan was put together by the PLSA’s Policy Board, which was formed in October to help the association guide and decide on public policy positions.  The board has formed four new subcommittees of eight to 10 members each to help implement the work program.

The four committees represent the defined benefit, defined contribution, local authority, and master trust segments of the industry. They will inform the PLSA’s consultation responses, sit on industry working groups, and support the PLSA in representing policy positions to government, regulators, and stakeholders. They will also provide advice to the Policy Board on certain policy matters as requested by the Policy Board.

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