“Clients need help navigating the nuances of the ethical investment world and greenwashing. They need to know what they’re going into is genuine. They need an adviser for that, and that’s where we can create a lot of value. I also think it’s the rise of the active manager again, because, while there’s some great index products out there in this space, there are also some really poor ones, that represent themselves as much, much more than they are. With active managers, it’s not just about it’s not just about their holdings anymore. It’s about their engagement.” Nathan Fradley.
The last two years has seen a surge of activity from research houses seeking to differentiate themselves on the basis of their ESG rating methodologies.
Morningstar research formally integrated ESG into its analysis of shares, funds, and managers. Following their purchase of Sustainalytics they also launched a new rating for managers, the ESG Commitment level, which sits alongside its existing classifications.
Lonsec integrated its ESG biometric scores into its main fund rating model and entered a partnership with ESG research provider Sustainable Platforms. Zenith launched a Responsible Investment Classification to sit alongside its traditional ratings.
Of course, with no consensus on definitions and the subsequently wide variety of (proprietary) approaches taken, the proliferation of ESG research doesn’t necessarily make it easier for advisers to assess any given fund against their clients’ ESG preferences.
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