Mercer’s Global Investment Manager Database, which covers 5,175 investment strategies spanning all asset classes and geographic regions, shows just 9% have achieved the highest ratings for ESG.
The consultancy uses a four-point scale to reflect how portfolio managers integrate the consideration of ESG factors and shareholder stewardship practices within their investment process. Funds with one or two stars are considered to be highly rated.
Mercer says 58% of one-star rated strategies are ‘ESG’ or ‘sustainability’ branded or thematic strategies, with 72% being managed by signatories to the United Nations Principles for Responsible Investment.
In the two-star category, just 22% are ESG or sustainability-branded – meaning the remaining 78% are ‘mainstream’ funds that use ESG in their analysis to better inform investment decisions.
Andrew Kirton, global chief investment officer at Mercer, says: “There is still much work to be done by the investment community to fully integrate responsible investment practices.
“We would expect the number of highly-rated strategies to increase over the next few years as more and more investment professionals come to recognise the sound investment and competitive reasons for active ownership.”
Last month, Man Group became the largest UK-based alternative assets manager to sign up to the United Nations Principles for Responsible Investment pact.
The framework has 994 signatories, with 583 being from the investment management community. Signatories include Aberdeen Asset Management, Cazenove Capital Management, Henderson Global Investors and Rathbone Brothers.
The news comes as the Investment Management Association announced net retail sales of ethical funds reached £201m in 2011.