Recent growth in ESG fund assets under management shows that people are convinced of the necessity and value of investing sustainably. This commitment will come with significantly higher expectations on the part of investors.
Massive flows into ESG funds show that investors are convinced of the case for sustainable investing – and want their money to have an impact
Rather than distracting attention from sustainability, the Covid-19 pandemic has highlighted real-world issues that investors can help to solve
The challenge for the asset management industry is to help clients seize the opportunities of the new era of sustainable investing
The world is also experiencing a transformational moment – as evidenced by the meaningful, coordinated action being taken on climate change
The past year has been an inflection point for sustainable investing. In previous years, the focus for asset managers was often on proving the performance of sustainable strategies. With the passing of 2020, the massive flows into these strategies speak for themselves: people have been convinced of the necessity and value of investing sustainably.
This represents a fundamental shift in mindset. Even as the Covid-19 pandemic roiled the markets and upended ways of working and living, investors allocated more to sustainable investing strategies.
This growth is set to continue. In its best-case scenario, PwC predicts that environmental, social and governance (ESG) fund assets under management could account for over 50% of total European mutual fund assets by 2025, representing a compound annual growth rate of 28.8% from 2019 to 2025.1
Indeed, rather than distracting attention from sustainability, the pandemic has highlighted real-world issues that only sustainable investments can help solve. In addition, many sustainable finance products have exhibited resilient performance during this period of volatility – further underscoring the case for sustainable investing.
But increased investor commitment comes with significantly higher expectations. The next challenge for the asset management industry is to help our clients position themselves for the opportunities of the new era of sustainable investing – and to help clients target the outcomes they seek.
This is a challenge embraced by all of us at Allianz Global Investors. The last financial crisis still casts a long shadow on the industry, and we must use this opportunity to build our clients’ trust and show our purpose. That means allocating capital to areas with the most transformative opportunities – for investors and for society at large.
The world is also experiencing a transformational moment – as evidenced by the meaningful, coordinated action being taken on climate change. The Paris Agreement sets legally binding targets for countries to combat climate change, and US President Joe Biden took an early decision to have the US rejoin this key global initiative. The UN Sustainable Development Goals, now six years old, provide another clear blueprint for government action – and they also show investors how to have a measurable impact on real-world issues.
Moreover, the European Green Deal means the EU will push to become climate-neutral by 2050, and China has pledged to reach “peak carbon” by 2030 on the way to its goal of carbon-neutrality by 2060. Clearly, meaningful improvements will be achieved over the coming decades.
Governments will do their part to encourage the change they want to see. The European Union has committed to making ESG concerns a central part of financial services regulation – including with the important new mandate for sustainability-related disclosures in the financial services sector (SFDR). Moreover, the EU Taxonomy to be implemented by the end of 2021 will show investors what funds labelled “environmentally sustainable” should entail. These actions set a template for other countries around the world.
Furthermore, the pandemic showed that governments are unafraid to take action to address crises. There is no escaping the critical role that governments play – from setting policy on climate change to sponsoring the research and development required to develop zero-carbon solutions. Many have heard the global rallying cry to “build back better” following the pandemic – and that requires thinking sustainably.
While much of the focus has rightly been on climate change, as asset managers we must be ready to help our clients address other areas of growing priority – including providing better healthcare, improving food security, conquering the digital divide and addressing inequality in all its guises – that are rising up the agenda for investors.
Yet even with so much work to be done, the world is moving in the right direction. Asset managers can continue to do their part by working with partners and clients – across both the public and private sectors – to create opportunities, not just identify them. Investors want to see real-world change, and it is incumbent on the industry to help make this happen.
Matt Christensen is Global Head of Sustainable and Impact Investing and a Managing Director with Allianz Global Investors, which he joined in 2020. In this capacity, he is responsible for accelerating the growth of Impact Investing as part of the company’s growing private markets platform; he leads continued integration of ESG factors across AllianzGI’s existing range of public markets products, including stewardship activities; and supports the development of new SRI products. In addition, he has investment oversight for the company’s impact investments.
After the Financial Crisis, InterBank Offered Rates (IBORs) have been declared unreliable by Regulators and new Alternative Reference Rates transactions-based have been developed to substitute these indices. Consequently, most of the IBORs will cease to be published from December 2021. As IBORs are used in a broad range of financial products and contracts, market participants need to be prepared and work on a plan to move away from them.
Most of InterBank Offered Rates (IBORs) are going be discontinued from December 2021
New Alternative Reference Rates (ARR) have been identified and developed to substitute IBORs
Regulators are publishing guidelines to encourage and support the private market participant in the change.
Investing involves risk. Environmental, Social and Governance (ESG) strategies consider factors beyond traditional financial information to select securities or eliminate exposure which could result in relative investment performance deviating from other strategies or broad market benchmarks. Investments in alternative assets presents the opportunity for significant losses including , losses which exceed the initial amount invested. Some investments in alternative assets have experienced periods of extreme volatility and in general, are not suitable for all investors.
The value of an investment and the income from it will fluctuate and investors may not get back the principal invested. Past performance is not indicative of future performance. This is a marketing communication. It is for informational purposes only. This document does not constitute investment advice or a recommendation to buy, sell or hold any security and shall not be deemed an offer to sell or a solicitation of an offer to buy any security.
The views and opinions expressed herein, which are subject to change without notice, are those of the issuer or its affiliated companies at the time of publication. Certain data used are derived from various sources believed to be reliable, but the accuracy or completeness of the data is not guaranteed and no liability is assumed for any direct or consequential losses arising from their use. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted.
This material has not been reviewed by any regulatory authorities. In mainland China, it is used only as supporting material to the offshore investment products offered by commercial banks under the Qualified Domestic Institutional Investors scheme pursuant to applicable rules and regulations. This document does not constitute a public offer by virtue of Act Number 26.831 of the Argentine Republic and General Resolution No. 622/2013 of the NSC. This communication's sole purpose is to inform and does not under any circumstance constitute promotion or publicity of Allianz Global Investors products and/or services in Colombia or to Colombian residents pursuant to part 4 of Decree 2555 of 2010. This communication does not in any way aim to directly or indirectly initiate the purchase of a product or the provision of a service offered by Allianz Global Investors. Via reception of his document, each resident in Colombia acknowledges and accepts to have contacted Allianz Global Investors via their own initiative and that the communication under no circumstances does not arise from any promotional or marketing activities carried out by Allianz Global Investors. Colombian residents accept that accessing any type of social network page of Allianz Global Investors is done under their own responsibility and initiative and are aware that they may access specific information on the products and services of Allianz Global Investors. This communication is strictly private and confidential and may not be reproduced. This communication does not constitute a public offer of securities in Colombia pursuant to the public offer regulation set forth in Decree 2555 of 2010. This communication and the information provided herein should not be considered a solicitation or an offer by Allianz Global Investors or its affiliates to provide any financial products in Brazil, Panama, Peru, and Uruguay. In Australia, this material is presented by Allianz Global Investors Asia Pacific Limited (“AllianzGI AP”) and is intended for the use of investment consultants and other institutional/professional investors only, and is not directed to the public or individual retail investors. AllianzGI AP is not licensed to provide financial services to retail clients in Australia. AllianzGI AP (Australian Registered Body Number 160 464 200) is exempt from the requirement to hold an Australian Foreign Financial Service License under the Corporations Act 2001 (Cth) pursuant to ASIC Class Order (CO 03/1103) with respect to the provision of financial services to wholesale clients only. AllianzGI AP is licensed and regulated by Hong Kong Securities and Futures Commission under Hong Kong laws, which differ from Australian laws.
This document is being distributed by the following Allianz Global Investors companies: Allianz Global Investors U.S. LLC, an investment adviser registered with the U.S. Securities and Exchange Commission; Allianz Global Investors Distributors LLC, distributor registered with FINRA, is affiliated with Allianz Global Investors U.S. LLC; Allianz Global Investors GmbH, an investment company in Germany, authorized by the German Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin); Allianz Global Investors (Schweiz) AG; Allianz Global Investors Asia Pacific Ltd., licensed by the Hong Kong Securities and Futures Commission; Allianz Global Investors Singapore Ltd., regulated by the Monetary Authority of Singapore [Company Registration No. 199907169Z]; Allianz Global Investors Japan Co., Ltd., registered in Japan as a Financial Instruments Business Operator [Registered No. The Director of Kanto Local Finance Bureau (Financial Instruments Business Operator), No. 424, Member of Japan Investment Advisers Association and Investment Trust Association, Japan]; and Allianz Global Investors Taiwan Ltd., licensed by Financial Supervisory Commission in Taiwan.