IPE ESG Briefing: ESG integration costs and other challenges

First, let’s talk money. According to a survey by bfinance, more than two-thirds of pension funds do not want to pay extra for investment strategies with ESG integration, while most asset managers want to pass on the additional costs of this to investors. The consultancy surveyed 225 asset owners across 32 countries, and found that the majority believe all ESG-related charges should be included in the management fee.

According to IPE’s latest Top 500 Asset Managers, there has been a marked slowdown in year-on-year growth in ESG headcount at asset managers. Vanessa Bingle, partner, ESG and responsible investment at consultancy Alpha FMC, told IPE that asset managers continue to invest selectively in sustainability roles, although “additions are more muted following several strong years of expansion of ESG resourcing”.

A growing challenge for pension funds is that of establishing a clear mandate for pursuing sustainable and ethical investing. In the Netherlands, Pensioenfonds Detailhandel has asked 50 of its members to help shape its approach to sustainable finance, saying its board will respond to their recommendations by September.

Transition planning has so far been a voluntary, market-led process, but in the European Union, the adoption of the Corporate Sustainability Due Diligence Directive (CSDDD) makes climate transition planning mandatory

Transition plans are an idea that is gaining momentum globally, seen as a tool to help investors better support environmental improvements, but also to guide policymakers. Their future received a boost last month, when it was announced that the IFRS Foundation is taking over responsibility for resources developed by the Transition Plan Taskforce.

Last but not least, shortly after the European elections the European supervisory authorities came out with a report setting out their stall as to the future of the European Union’s flagship sustainable finance disclosures regulation (SFDR), with suggestions for improvements including introducing a “transition” category as part of a de jure product labelling system.

The Commission has previously said it was aiming to come out with a proposal next year on the next steps regarding SFDR. That will presumably one of the key agenda items for Didier Millerot, who is due to replace Martin Spolc as head of sustainable finance at the European Commission.

Susanna Rust 

ESG editor