Federated Hermes dethroned AXA Investment Managers (IM) as this year’s most genuinely committed asset manager to incorporating and emphasising environmental, social and governance (ESG), according to the Hirschel & Kramer’s Responsible Investment Brand Index (RIBI).
The RIBI evaluated more than 500 global asset managers on its abilities to legitimately incorporate ESG into their businesses via voting and governance and translating that externally to the public.
The latest report, which was the firm’s fourth edition, said that the asset management industry is “facing a paradox” where there is a strong drive to more the whole industry towards “societal responsibility and acting for a safer, fairer future,” but this is “disconnected from economic reality”.
Global markets and economies are emerging from the Covid pandemic faced with two major crises, a financial rebuild to pre-Covid levels and an impending environmental disaster. Balancing, or even combining the two, is the challenge industries are facing.
The growth of investment into ESG and sustainability accelerated during the pandemic as it shone a light on the social inequalities and environmental time bombs that needed addressing.
In the latest Calastone Fund Flow Index, while September saw record outflows from UK investors, they still sought out ESG-equity funds, adding £1.1bn in the month. This was the second highest monthly inflow on record.
Fund houses have responded to this with a wave of investment with new product launches, targeting these specific fund flows.
This has raised issues and concerns around greenwashing and how many of these funds have been genuinely set up to enable a social and environmental benefit, and how many have green badged an existing portfolio.
The RIBI considers this by looking at how much, and how well, companies are engaging with ESG internally (commitment) and how much of their external marketing focuses on it (branding).
Companies fall into one of four rankings: Avant-Gardist, the best ranking where companies displayed above average commitment rating and brand ratings. Next, Traditionalist, above average on commitment but below average on branding. Next, Aspirant, above average on brand and below average on commitment. Finally, the worst ranking is Laggard – below average on both fronts.
Source: Hirschel & Kramer’s Responsible Investment Brand Index (RIBI)
Breaking down the more than 500 companies, most rank at the bottom, the Laggard space, which accounted for 53% of all fund groups. There were 23% in Traditionalist, 16% in Avant-Gardist and 8% in Aspirants.
The report identified a trend that asset managers generally implement their responsible investment strategy first, then project that out into their brand, a trend Hirschel & Kramer welcomed, calling it the more “solidly anchored” approach to incorporating ESG.
At a global level Federated Hermes International ranked the highest on this, improving on its second place ranking last year.
Harriet Steel, head of business development at Federated Hermes, said: “While it is clear that the asset management industry is undergoing a fundamental shift to reshape its future, not all stakeholders are walking the talk.
Source: Hirschel & Kramer’s Responsible Investment Brand Index (RIBI)
The report noted that all of the top 10 companies were European , reflecting what Hirschel & Kramer called a broader trend of Europe “leading the way” on sustainable investment. They noted that North America was lagging, where less than two in 10 managers state an ESG purpose but failed to link it to an actual ‘societal goal’. The regional disparity on this topic was “worrying” they said.
Five of the top 10 were repeat appearances from last year: Federated Hermes International, AXA Investment Managers, Candriam, DPAM and Mirova.