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Analysis: Sustainability is no longer a yes or no, it’s how good you are

Sustainability
By Paul Mackintosh   
April 28, 2021

Some new indicators have emerged to illustrate growth of the sustainability-focused asset management community. A recent report from investment consultancy Morningstar notes the “more funds, more flows, and impressive returns in 2020” but also emphasises that “not all sustainable funds are equally sustainable.”

The best players do very well indeed, the less outstanding ones, not so much. And Morningstar is clearly positioning itself to be one of the key winnowers of the sheep from the goats.

Meanwhile, Canada’s Manulife Investment Management has issued the inaugural edition of its stewardship report. It demonstrates the company’s commitment to stewardship codes that were developed in accordance with the principles outlined by the UK code, one of the first and most comprehensive in the world. Its 12 principles for asset owners and managers are: purpose, strategy and culture; governance, resources and incentives; conflicts of interest; promoting well-functioning markets; review and assurance; client and beneficiary needs; stewardship, investment and ESG integration; monitoring managers and service providers; engagement; collaboration; escalation; and exercising rights and responsibilities.

With US$758 billion of assets under management as of end-2020, Manulife Investment is hardly a minor asset manager. It explicitly declares that “being an active steward is a critical part of what it means to be an active manager”. “Ensuring portfolio resiliency requires us to do more than traditional fundamental analysis”, the company says.

Pretty soon, the question is no longer going to be whether a fund or manager is subject to some kind of sustainability strategy, but what kind of strategy and how much. Then perhaps the really interesting stage of market evolution, and the real differentiation of metrics and players, will come about.