The importance of responsible investment practices for hedge fund investors is expected to grow in the next couple of years, according to new research from Cerulli Associates.
The Boston-based consulting firm said that a survey it carried out in January and February, in partnership with the United Nations’ Principles for Responsible Investment (UN PRI), found that, while 21% of asset owners say that responsible investing practices are very important to hedge funds today, 46% expect them to be very important in the next two years.
“Companies are increasingly judged on their environmental impact, not just their profitability,” Justina Deveikyte, associate director of European institutional research at Cerulli, said in a statement.
“Individuals are thinking about their legacy in terms of the climate and social issues, not just their finances. In light of this, the financial services sector has an opportunity to direct investors toward the types of places that they want to put their money,” she added.
Cerulli said that it sees growing demand for improved ESG reporting standards, and for greater ESG integration and engagement, which is pushing hedge fund managers to develop an approach to ESG.
And, it said that investors are also demanding greater transparency from hedge funds on these issues.
“In time, the value of a business will be its impact on societal issues; asset owners recognize this, and hedge fund managers have a role to play in helping them make good choices,” Deveikyte said.
“Companies must be part of the solution to challenges such as climate change and inequality. Hedge funds can help individual and institutional investors secure legacies that incorporate financial, climate, and social considerations — asset owners do not want to choose between these criteria and hedge funds can make sure they do not have to,” she said.