Private equity and hedge fund managers are increasingly integrating ESG into their investment decision-making. This is shown by a recent survey of LGT Capital Partners.
By funneling capital towards sustainable companies and organizations, institutional investors have an important role in the transformation process towards a more sustainable economy.
Since 2012 LGT Capital Partners conducts a yearly survey on how its investment managers integrate ESG (Environmental, Social, Governance) factors into their investment processes, ownership policies and reporting practices. The resulting report provides investors with a useful «snapshot» of the state of ESG integration in their portfolios.
The highlights of LGT Capital Partners’ ESG Report 2016 in three minutes
Furthermore, when combined with comparable data from previous years’ surveys, it shows how LGT Capital Partners external fund managers are progressing on ESG over time.
Trend Towards More Sustainability
The LGT Capital Partners ESG report 2016 covers 171 private equity managers and 115 hedge fund and long-only managers across North America, Europe and Asia-Pacific.
The results are encouraging: Globally 50 percent of the private equity managers now have good or excellent ESG practices in place. This is an increase of 14 percentage points over the last year with European managers having a clear lead with 66 percent good or excellent ratings. Hedge fund managers improved as well: Globally 10 percent were rated excellent or good, up from only 5 percent in the previous report.
At the same time, the proportion of managers with the lowest ESG rating decreased from 34 percent to 22 percent.
Better ESG-score than MSCI
This year, for the first time, the environmental footprint of LGT Capital Partner’s public equity and fixed income portfolios were analyzed in the ESG report as well. The results show that the LGT Sustainable Equity Strategy ourperforms the MSCI World benchmark in each of the E, S and G themes.
These higher scores indicate that, on the whole, the companies in the LGT Capital Partners portfolio have better processes for managing environmental, social and governance issues, which should result in lower long-term risks for investors and additional return opportunities.