In a joint study by Funds Europe and Caceis involving 250 asset owners, 88.1 percent of the respondents revealed that they allow fund labels to steer their investment decisions. Due to the popularity of sustainable funds, asset managers now actively market ESG strategies to investors, highlighting the importance of accurate fund labelling and the complications caused by a lack of global standards for such labels, writes Funds Europe.
Responding to the results, Scott Foster, head of digital and governance products at Caceis says, “The ethos of fund labelling is correct, and we should be doing it to prevent issues including greenwashing, to make it clear to consumers what they are buying. The biggest issue will be divergence in fund labelling regimes globally. You could end up with one classification in Europe and a completely different one in the US or the UK. That will only add confusion to the market, and amongst investors.”
Not an isolated issue
The lack of standardisation doesn’t occur only in fund labelling; it’s also an issue in ESG data and was one of the many concerns raised by respondents. One survey participant pointed out that because different data providers use different evaluation methods, those differences are perpetuated in the sustainable performance evaluation of different companies, which affects their comparability.
For many respondents, the motivation for going green primarily stems from a top-down push, with 51.2 percent citing policies such as net zero targets for carbon emissions as influencing their investment approach. 61.5 percent of respondents share that they have a dedicated ESG risk management team for integrating sustainability into their investment strategy.