ESG: How Mutual Funds Can Address the Risks and Capture the Opportunities
Environmental, social and governance (ESG) issues have shot up public and company agendas. In recent years, diversity and climate-change issues gained prominence, and more recently COVID-19 pushed human-capital and societal factors higher up the agenda. Mutual funds find themselves at the center of the ESG discussion, especially given the significant increase in assets under management that are linked to ESG (some $30 trillion globally). As stewards of beneficiaries’ investments, funds have to consider and integrate ESG factors into investment research and proxy voting in a consistent, informed and measurable manner. As asset-gatherers in an ever-competitive ESG market, funds have to distinguish their approach and product offering to attract clients and customers who are increasingly drawn to funds that are better at factoring in ESG matters. In addition, funds face the added challenge of aligning fund-level ESG strategies and policy positions with the parent’s overall ESG strategy and corporate purpose. Misalignment could result in some level of public shaming by interest groups resulting in adverse impact to reputation. EY partners will provide insights into managing ESG risks and capturing related opportunities.
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