Being good stewards of client assets seems to pay off for some of the world's largest publicly traded money managers, with research showing a link between responsible investment and the power to gather assets under management.
Researchers at MSCI Inc., as part of its annual ratings review of the financial sector, considered a link between the environmental, social and governance ratings of 33 listed money managers and the growth of their assets under management over three periods: calendar year 2016; the two years to the end of 2016; and the three years to end-2016. The managers, representing $12.1 trillion in assets under management, are included in the MSCI World index.
The team at MSCI thought it would be interesting to see whether the most efficient money managers in terms of integrating ESG into investment processes really did have higher asset growth, said Remy Briand, Geneva-based managing director, global head of ESG at MSCI. The team used its responsible investment key issue score, part of its own assessments, to look for a link.
"It's more for correlation than an analysis of causation. We can't say just with this particular analysis (managers are gathering assets) on ESG, and vice versa." He said analysis showed "some link between the score on responsible investment and the subsequent growth in assets under management."
For calendar 2016 the managers that scored the highest under MSCI's responsible investment assessment recorded an average compound annual growth rate of 3.7% in institutional assets under management, vs. a 1.8% decline for those with the lowest scores. Over the two years, the CAGR is 2.6% for the leaders vs. 1.6% for the lowest scorers; and for the three-year period, those with higher responsible investment scores saw 3.6% growth in AUM, vs. 0.3% growth.