Asset management leaning more to ESG

INVESTING along ESG (environmental, social and governance) principles - particularly in relation to climate change issues - is fast becoming mainstream, thanks to the efforts of a number of large asset management companies. BNP Paribas Investment Partners, for instance, has taken steps to align about half of its assets under management, or an estimated 267 billion euros worth, along ESG standards. Companies with the worst ESG practices, for example, are excluded from portfolios. The firm has total assets under managemen of about 530 billion euros as at end-June.

Amundi, a pioneer in socially responsible investments (SRI), has around 160 billion euros in SRI management. It incorporates ESG ratings into its analyses of companies. The lowest rated companies and countries according to Amundi's ESG criteria are excluded from the firm's strategies, except for exchange traded funds (ETFs) and index funds which are constrained by their benchmark indexes.

One of the most pressing issues is climate change. In a recent paper, BlackRock Investment Institute said that it was time that investors become "climate aware". Ewen Cameron Watt, BII senior director, said in a statement that climate risk factors have been under-appreciated and underpriced because they are perceived to be distant.