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Four ways AMs can boost their ESG efforts in a post-Covid world

Four ways AMs can boost their ESG efforts in a post-Covid world

One of the authors of a much-discussed critique of the ESG capabilities of asset management companies has outlined four ways in which investment firms can power the sustainable agenda in a post-Covid-19 world.

Jean-François Hirschel of H-Ideas, which produced a list of companies ‘truly committed’ to ESG in 2019, said asset management firms have a responsibility to endorse societal responsibility now whole-heartedly.

In his latest commentary, Hirschel said the post-pandemic world could be a ‘turning point’ for companies, as it will allow them to better explain their intentions, engage with clients and also rethink what ambitions they currently have.

‘A solid and well-designed brand brings differentiation, trust, simplification of choice and pricing power,’ Hirschel said. ‘All [are] attributes which have become even more desirable in a Covid-19 world.

‘Brand is also the expression of the culture of the company and the current crisis offers a real-life example of how a clearly nurtured and expressed culture can be an enabler.’

Hirschel said the cultural impact of a company cannot be overstated and many firms have reacted well in that regard.

‘We are seeing asset managers who have brilliantly navigated the difficult environment of Q1 2020 from an investment standpoint, but who are unable to then leverage this from a client standpoint because they can’t operate efficiently remotely. And this is not down to technology.

‘This is due to a culture which is not acting as an enabler of smooth operations. Conversely, we have seen companies switch their operating mode seamlessly from pre-Covid to “new normal” and have their teams galvanised for success by the challenge.’

He highlighted how the idea of ‘purpose’ will become more crucial among asset managers, which will also feed into the ‘S’ element of ESG, as the wider societal impact is felt.

‘Purpose expressed as “Our goal is to help people invest better, retire better” or “To empower people to live a better life” or “We believe investing responsibly enables economic prosperity and social progress”, are even stronger and more inspiring in the light of the recent crisis and the numerous societal challenges which come with it.’

Hirschel said the ability to provide something more meaningful than just profit is particularly key at this time. ‘The asset management industry is under immense pressure.

‘More than generating returns, the public will expect it to fulfil its societal responsibilities. There is an immense opportunity for the asset management industry to be perceived as the enabler of what goes right, rather than the scapegoat of everything that goes wrong.’

In that light, he named four key considerations companies should adopt to ensure they return from the crisis with an improved emphasis on ESG:

  • Clearly articulate your brand and in particular, what lies at the heart of it: your purpose;
  • Establish the connection between your responsible investment beliefs, your investment decisions and your brand;
  • Review your product range to make sure it is consistent with your brand and focused on your core capabilities;
  • Express your proposition in a way that connects with your clients’ needs. The client is more focused on his problems than your powers. Communication takes place in the ear of the listener, not the mouth of the speaker.

Citywire has launched a global study to find out which managers are seen as really delivering, by generating acceptable returns while using a robust ESG process. To help us build an accurate picture of what is happening in this vital area, click here to take part in our global study.