Climate and Energy Finance Group (CEFGroup) is pleased to announce that its working paper, In Holdings We Trust: Uncovering the ESG Fund Lemons, won the CFA ARX Asia Pacific Research Exchange Award at this year’s New Zealand Finance Meeting (NZFM).
- Presenting author: Dr Sebastian Gehricke
- Co-authors: Mr Lachie McLean, Professor Ivan Diaz-Rainey, Dr Quyen Nguyen, and Dr Renzhu Zhang
- Link to the working paper: HERE
- 2022 NZFM event page: HERE
MORE ABOUT THE PAPER
The authors surveyed asset managers of global equity funds available to Australasian investors to understand how they integrate sustainable practices within the investment decision-making process. Then, the authors compared survey responses to portfolio holdings data to evaluate whether fund managers were as environmentally responsible as they claimed to be. Some highlights:
- Responsible investing was primarily driven by performance and fund flow focused value, rather than ethical values.
- Climate change was the most important ESG sub-theme, followed by corporate behaviour. Interestingly, funds that placed higher importance on climate change, on average, had higher portfolio carbon intensity.
- Lack of understanding of portfolio carbon intensities among fund managers: Only about half of survey respondents were able to provide portfolio-level Scope 1 & 2 emissions intensity. For those that did, there was large underreporting of emissions by some funds.
- Natural capital (including biodiversity) was given low priority by managers.
- Portfolio carbon intensity was significantly higher for respondents that were members of a climate initiative, and not significantly different for those that prioritised climate change themes or engaged in a decarbonisation strategy. Results were not explained by engagement or active engagement.
