ESG’s impact on fund governance is coming

ESG investing activity surged ahead again this year, despite the pandemic. One wonders if anything can slow down its onward march given that even Covid-19 hasn’t been able to do that.

ESG isn’t just another investment strategy. It appears very likely that it will change asset management industry practices – especially when it comes to fund governance. The boom in hedge funds, private equity and other alternative asset classes did not do that. Some of those might have contributed to changes in the industry’s structure but none had any effect upon fund governance practices.

ESG is not only about investment strategies, it also focuses upon processes and goals. That is a large part of the reason why it has been so popular. Those that are allocating to ESG funds, or in the investment teams at institutions who are running ESG mandates, want to make the world a better place. That includes changing governance practices at corporates. And it is almost certainly also going to include changing some of the governance practices at asset management groups too.

For more on this story see the December issue of The NED.