Investment fund platforms ease up on ESG requirements

Written by Adam Cadle

28/11/2023

Investment fund distributors are easing up on ESG requirements for asset managers on their platforms in the face of concerns about performance, questions about regulations and reporting standards, and lower demand from end investors, according to Coalition Greenwich.

Since at least 2020, retail banks, private banks, insurance companies, independent financial advisors, and other wholesale fund distributors in Europe and Asia have increasingly adopted ESG requirements for fund managers looking for placement on their platforms.

In Asia, the share of fund platforms with ESG requirements for managers dipped from 2022 to 2023, and distributors participating in the Coalition Greenwich Voice of Client – 2023 Asian and European Intermediary Distribution Studies expect that share to decline even further over the next five years due to challenging investment conditions. In Europe, the share of distributors with ESG requirements has held steady at just shy of two-thirds. European fund distributors cite another group of factors that could be contributing to the slowdown in the adoption of ESG standards: difficulty measuring impact and other concerns about ESG compliance.

Challenging investment conditions seem to be a key driver of the ESG slowdown in Asia. “A renewed focus on risk-management, stability and performance during a market drawdown appears to have taken precedence over concerns about ESG in Asia,” said Mark Buckley, head of investment management at Coalition Greenwich.

In Europe, some wholesale fund distribution platforms are likely pausing or slowing their own process for establishing ESG rules for managers on their platforms until they have more clarity on a final ESG framework for European funds.”

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