- Advertisement -
- Advertisement -

Related

Hedge Fund Investors Driving ESG Uptake

Industry Report

- Advertisement -

Stockholm (HedgeNordic) – One of the main attractions of hedge funds to institutional investors has been their ability to deliver uncorrelated absolute returns. A recent report indicates that institutional investors now want their hedge fund managers to “target double bottom-line benefits: do well financially by doing good socially and environmentally.”

According to a survey of 135 institutional investors, hedge fund and long-only managers with combined assets of $6.25 trillion, 55 percent of institutional investors include environmental, social and governance (ESG) considerations as part of the due diligence process before allocating to a hedge fund manager. The report published by a collaboration of industry partners, including the Alternative Investment Management Association (AIMA), CAIA, CREATE-Research and KPMG, also highlights that 59 percent of hedge fund managers are either at the ‘mature’ or ‘in progress’ stage of implementing ESG through appropriate policies, committees, research and data. The advance is mainly driven by institutional investors.

“Recognising that purpose and profit are no longer mutually exclusive, a growing number of institutional investors expect hedge fund managers to incorporate environmental, social and governance (or ESG) factors into their investment activities,” writes Jack Inglis, the CEO of AIMA. “We are not yet able to pronounce unequivocally that ESG-compliant investments will lead to better returns,” acknowledges Inglis. “But every indication, from managers and investors alike, suggests that ESG integration is not just increasingly important, but for savvy managers, it can go hand-in-hand with generating alpha.”

In the process of incorporating ESG factors into their activities, three approaches have been used by at least three in every ten surveyed hedge fund managers. The first avenue is ESG integration (52 percent), which involves identifying material ESG factors and incorporating them into the investment process. The second avenue is negative screening (50 percent), which involves the exclusion of stocks that sit uncomfortably with the personal values of investors. The third avenue is shareholder engagement (31 percent).

According to the survey results, the scale of adoption of ESG considerations remains hampered by the lack of good quality data for managers to assess ESG risk factors. “A number of factors have conspired against progress thus far,” writes the report, which adds that “far and away, the most important one is the lack of quality and consistent data on ESG factors, as cited by 63 percent of our hedge fund respondents.” Another factor that hampers the progress is the confusion over industry terminology.

 

The complete report can be found here.

Image by ejaugsburg from Pixabay

Subscribe to HedgeBrev, HedgeNordic’s weekly newsletter, and never miss the latest news!

Our newsletter is sent once a week, every Friday.

Eugeniu Guzun
Eugeniu Guzun
Eugeniu Guzun serves as a data analyst responsible for maintaining and gatekeeping the Nordic Hedge Index, and as a journalist covering the Nordic hedge fund industry for HedgeNordic. Eugeniu completed his Master’s degree at the Stockholm School of Economics in 2018. Write to Eugeniu Guzun at eugene@hedgenordic.com

Latest Articles

Three Danish Hedge Funds Recognized by the Hedge Fund Journal

Three Danish hedge funds have been recognized at the 2025 Hedge Fund Journal CTA and Discretionary Trader Awards. Two funds managed by Danske Bank...

Private Equity in Transition: Challenges and Opportunities

Private equity has matured into a mainstream – if not cornerstone – allocation for institutional investors. Following years of record fundraising and valuation expansion,...

Formue Highlights Private Credit’s Role in New Economic Era

Nordic wealth manager Formue has long prided itself on delivering institutional-grade investment solutions to high-net-worth individuals. As global economic conditions shift, Formue sees an important role...

Chelonia Select Builds on Solid 2024

Stock-picking hedge fund Chelonia Select is off to a strong start in 2025 with an 8.3 percent gain through the end of May, building...

CABA Capital Expands the Flex Series

Danish fixed-income boutique CABA Capital has launched the third vintage of its leveraged, closed-end fixed income strategy: CABA Flex3. The fund aims to deliver...

Aegon AM Launches Capital Call Finance Fund

Aegon Asset Management has launched the Aegon Capital Call Finance Fund, providing institutional investors with access to the capital call finance market – a...

Allocator Interviews

In-Depth: High Yield

Voices

Request for Proposal

- Advertisement -
HedgeNordic
Privacy Overview

This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.