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A modest proposal for product managers
ESG is primarily a European trend today. This trend is driven by increasing investor demand (in Europe, investors are far more concerned about climate change than in North America or Asia) and by the EU’s regulatory push towards climate action. So when Kurtosys published its annual analysis of the Top 100 asset managers and their product offering, it didn’t surprise me that the European-based asset managers were far ahead in offering ESG products.
80% of the UK-based asset managers had at least one ESG product on their shelf and 73% of EU-based asset managers. Meanwhile, of the 14 Top 100 asset managers not based in the United States or Europe, only two had an ESG offering. American fund managers seem to be slowly catching up with two-thirds of the largest 20 offering ESG products, but only one-third of the remaining US asset managers in the Top 100. No doubt the difference is due to the fact that the 20 largest US asset managers are truly global businesses with a substantial presence in Europe.
Share of Top 100 asset managers with at least one ESG product
If you are an asset manager who wants to do business in Europe, you need to have an ESG offering. And you need to talk about it because everybody else is doing so as well. 92% of EU-based asset managers in the study had ESG as a core part of their brand messaging and content compared to 40% of US-based asset managers.
But if everybody has a green offering and talks a big ESG game, how do you differentiate yourself? Obviously, in Europe, being against ESG and ignoring this trend has become a differentiator by now, but not in a good way. Instead, European asset managers have to increasingly show their work to investors. It isn’t enough anymore to have a couple of ESG funds on the shelf. By now you have to be able to show to your investors how these ESG funds are different from conventional funds. In the age of declining trust in the financial industry, asset managers that can show how their green funds differ from traditional funds with regards to E, S, and G are increasingly at an advantage in attracting investors. Yet, only 7% of asset managers provide ESG metrics for their green funds on their website.
Showing important ESG metrics on your website and your fund marketing material is the next step in the competition for ESG investors. And luckily it isn’t an expensive step to take. Most ESG funds already have information about their carbon footprint, etc. They just don’t show it, yet.
Which brings me to a proposal for all the product managers reading these lines: Why don’t you revamp your fund material like monthly factsheets etc. to include key ESG metrics for both green funds and traditional funds next to traditional metrics like volatility and return? This way you can gain a competitive advantage over your peers and show to your investors that your funds aren’t engaged in greenwashing – at least if their ESG metrics truly are better than those of your conventional funds…