1. ESG data availability is increasing and managers are starting to use it alongside traditionally financial metrics as an alpha signal or risk mitigator.
2. Hedge funds are behind the curve relative to other asset classes and are already facing questions from clients and consultants on why they are not incorporating ESG into process and reporting.
3. In Europe, having a robust ESG process is already a prerequisite by some of the largest institutional clients, in order to be considered for new client mandates. US clients are catching up and asking more questions.
4. Major investment consulting firms are already evaluating and rating managers on ESG incorporation in addition to traditional buy ratings.
5. HF who have a robust ESG approach will benefit and stand out among competitors, but it will require them to build an ecosystem in every step of the process, from investment analysis, to portfolio construction and finally client reporting.
6. Demonstrating ESG portfolio characteristics to clients via standard reporting will become a standard requirement and practice – but early movers will have an edge and AFS can help them deliver.
Applied Fund Solutions is a key partner to clients exploring ESG integration!