Hedge funds fall behind in ESG implementation

Surprising findings note that two thirds of hedge funds have no ESG policy

Hedge fund managers are seriously lagging their peers when it comes to implementing an ESG policy, a newly released survey has found.

According to Preqin’s Fund Manager Survey, 66% of hedge fund managers don’t have an ESG policy in place, and just 15% confirmed it was ‘pending’.

The findings may come as a surprise to some, particularly given that Jack Inglis, chief executive officer of the Alternative Investment Management Association, stated that “responsible investment is here to stay” following the 2018 Cayman Alternative Investment Summit.

By comparison, Preqin’s researchers found that 78% of infrastructure managers and 76% of natural resources funds have an ESG policy in place, as do 61% of those in the private debt sector.

Meanwhile, just 8% of hedge funds have ESG reporting requirements for their portfolio companies and the majority provide their investors with quarterly reports on the ESG metrics of their investments.

The majority of alternative assets fund managers opt to report annually on the ESG metrics of their portfolio companies post-investment, although a large portion in the Real Estate (53%), Private Debt (49%) and Private Equity (56%) sectors do not actively track them.

Commenting on the survey results, a Preqin spokesperson said: “Environmental, social and governance (ESG) is a term heard frequently throughout the alternative assets world, and nowhere more so than in the real assets space.

“More than three-quarters of infrastructure and natural resources fund managers that Preqin surveyed have an active ESG investment policy. At the other end of the ESG spectrum, two- thirds of hedge fund managers do not have a policy in place and have no plans to implement one in the near future.”