GLOBAL - Environmental, social and governance (ESG) strategies are moving ahead, but investors - especially in France - are finding it difficult to turn those studies into actions, according to asset managers.
At a recent conference in Paris about ESG in private equity, several fund managers agreed ESG options would take time to implement in spite of the value they added to private equity portfolios.
Tim van der Weide, responsible investment adviser for Dutch asset manager PGGM, said: "We find three motives for General Partners (GPs) to use ESG. They offer financial advantages, social responsibilities and a good reputation.
"On a financial standpoint, ESG lowers the risk we take, as well as opens up opportunities. When we invest in a company, we study its environmental and social policies and practices to limit the risk."
Van der Weide added that ESG strategies offered a social responsibility they had to take into account. They also increase the reputation of a GP and so may influence sales, and knowing ESG risks helps in determining reputational risk.
"The fact we manage assets on behalf of the Dutch healthcare and social work sector means we have to be socially responsible," he said.
Last year, PGGM researched the impact of ESG strategies in alternative assets. The only question, according to Van der Weide, was how to further implement the ESG strategy.
"GPs are publishing several reports, which is good, but Limited Partners (LPs) such as pension funds, need to know how these reports will be integrated, and the answer to this question has not been found yet," he said.
In addition, a distinction appears between French asset managers and their foreign counterparts.
According to Olivier Millet, director of the club for sustainable development at AFIC, investors from northern Europe, the UK and North America are already well advanced in terms of ESG.
He said: "Many French investors are postponing their entry in ESG strategies until proper regulations are introduced."
However, several asset managers pointed out at the conference that new regulations were not the only barrier for the implementation of ESG strategies, and some of them argued that individual actions also had to be taken.
Van der Weide added: "Having a policy is not difficult, but having metrics to implement the ESG system is another story, as it is not standardised at the moment."