Some funds that jumped onto the ESG bandwagon, did so in name only

July 17, 2019 | Hedge Funds

The gush of incoming money into ESG focused funds has prompted some funds to make cosmetic changes to qualify for the “ESG” tag

Funds focused on ESG (environmental, social and governance) factors received a record $5.5 billion in inflows from investors.

During 2019, inflows in the first half ended June 30 have already amounted $8.9 billion.

Prospectus tinkering rather than genuine ESG

Some opportunistic funds, which were not ESG funds to start with, simply rubber-stamped their prospectuses as ESG and included a lot of fluff on socially responsible investing. However, they did not change their holdings to align with the new fund mandate.

According to Morningstar, out of the $161 billion invested in ESG funds as at end-2018, funds worth $72 billion were such ‘repurposed’ funds.

Examples include:

  • Goldman Sachs adding ESG criteria to its International Equity Fund, now the Goldman Sachs International Equity ESG Fund.
  • The Putnam Multi-Cap Growth Fund was reinvented and renamed as the Putnam Sustainable Leaders Fund, focusing on corporate sustainability metrics alongside its regular stock selection criteria.
  • The Putnam Multi-Cap Value Fund became the Putnam Sustainable Future Fund.
  • Aberdeen, J.P. Morgan and Morgan Stanley added “ESG considerations” to the prospectuses of many of their funds, without changing the portfolios.

ESG for real or not?

“It’s important to ask questions of the fund manager or the representatives of the fund firm to really understand whether ESG is really core to the fund’s manager’s process, or whether it’s just something that’s added on as a paragraph in a perspective or a page in a pitchbook,” says Daniel Kern, chief investment strategist at Boston-based TFC Financial Management.

Free Industry News

Subscribe to our free newsletter for updates and news about alternatives investments.

  • This field is for validation purposes and should be left unchanged.


Latest Alternative Investment News
Alternative Investments: Accelerate Launches An ETF For Alternative Assets
November 25, 2020     Alternative Investments, News

Accelerate Financial Technologies launched its OneChoice Alternative Model Portfolio in September. Aimed at hard-pressed advisors and portfolio managers, the strategy offered a quick and easy way to put together a…
Digital Assets: Japanese Financial Group SBI Launches Crypto Lending
November 25, 2020     Digital Assets, News

SBI Group (TYO: 8473) is launching a crypto lending service through SBI VC Trade, its crypto-focused exchange subsidiary. SBI said it will initially allow customers to tender only bitcoin (BTC),…
FinTech: Hippo Insurance Gets $350M Funding From Mitsui Sumitomo Insurance
November 25, 2020     FinTech, News, Venture Capital

Hippo, the home insurance unicorn, announced Tuesday an investment of $350 million from Mitsui Sumitomo Insurance Company, Limited, a subsidiary of MS&AD Insurance Group Holdings, Inc. In July, Hippo raised…
Venture Capital: Astanor Ventures Launches $325M Fund For Impact Investing in Agtech

Based in Luxembourg, Astanor Ventures combines capital, technology, and sector expertise to invest in businesses that build regenerative, scalable, and nourishing food solutions. Using this philosophy, Astanor has invested in…