The ability of asset managers to solve climate change is “overrated,” warned Man Group’s co-head of sustainability.
Jason Mitchell, who launched Man’s first sustainable fund in 2010, told our sister company Citywire asset manager that while asset allocators and stock pickers play an important role, real change is ultimately only driven by governments and regulators.
“There have recently been reports that finance is seen as the predominant driver” [to avert climate change] and I don’t think that’s fair, it’s a big driver but not the most important, “he said.
Driven by the increasing interest of investors in sustainability, fund groups strive to adapt strategies and products to climate and social issues.
Intergovernmental Panel on Climate Change (IPCC) report last month that said temperatures were significantly higher are inevitable now, has also put on pressure to fund homes to show they are serious about climate change.
Investors had $ 139.2 billion growth in the second quarter, according to the latest Morningstar data.
Even so, Mitchell said structural change is still pending and that the industry is still at the beginning of a steep learning curve that will accelerate as more stringent regulations come into effect.
The EU already has Enforce rules that aim to create transparency in ESG funds, but critics argue that these are vague and that the loose definition of “sustainability” has not yet eradicated the bad practice.
The Financial Conduct Authority has also stated that it wants to provide ESG clarity but has not yet taken any decisive steps. In the latest update to its widely-emulated stewardship code, the UK Financial Reporting Council excluded a number of top UK wealth managers from its approved list.
‘[To a degree] You have to accept that we are working with relatively immature frameworks to work with, including regulation that is yet to be baked, ”said Mitchell.
“The question is, do you start at a more inclusive point and attract investors and drive them to this course and come out with a better product in the end, or do you do the first and then attract investors?”
Mitchell co-headed Responsible Investing with Steven Desmyter in 2018, a role first created for the latter only a year earlier.
The group acknowledges that it has deliberately held back on sustainability, largely because its significant exposure to derivative contracts and quantitative methods can be an ESG headache.
You hold significant assets in multi-strategy mandates that take equity exposure through derivatives, i. that is, it has no voting rights related to stock ownership.
Mitchell said this means it can be difficult to maintain proper administration at the fund level, but he does use the group’s four-person stewardship team to exert his influence at the company level.
However, with its eight equity mandates devoted exclusively to responsible investing, the group is taking bolder steps toward ESG.
Earlier this year, Man co-wrote a call to portfolio company HSBC to outline what it will look like reduce exposure to oil stocks in the first climate-related intervention.
The decision, which was signed by Europe’s largest asset manager Amundi along with 13 others, was passed at the bank’s general meeting in May.
“It was the first time in human history to do something like this. It took a lot of time and dedication to work this through and I want us to increase that significantly, ”said Mitchell.
“We recently hired a climate scientist to help us understand where this risk lies and how we price it.
Mitchell, who is also a member of several ESG committees, including the United Nations-backed Principles for Responsible Investment, will speak at the COP26 global climate conference in Glasgow in November.
‘[COP26] is a make-or-break moment. We have set ambitions and now it’s about how we advance them, how we decarbonise certain industries? ”He said.
“Participation is not so much about how you influence the results. The nations should have submitted their climate plans by now; it is more about understanding the resulting political signals and directions and understanding what this means for the CO2 markets, for example. “
Man Group’s ESG boss: Fund companies cannot solve the climate crisis on their own