Growing political and legal backlash has made ESG a hot button issue for many in the asset management industry, but Schroders is shrugging off the drama and plowing ahead with its commitment to the sustainable investment strategy.
Schroders CEO Peter Harrison said Oct. 24 that investing with ESG – environmental, social and governance – factors in mind isn't about politics, but simply the fiduciary duty of any asset manager.
"We've all been brought up on an accounting view of profit…there is another view," Harrison said at a media breakfast in New York. "The next generation thinks about profit slightly differently. If you're to be a good fiduciary, you need to know what those other pressures are. Really understanding the threats to a business is through that lens (of sustainability). We've made a big investment in understanding all those issues… because we think it makes us better investors."
Harrison added that nature was the "biggest asset in the world, which no one puts a price on."
"There's 150 companies in the world which have a massive impact on nature. To not understand the impact they have, and the obligations that are being placed upon (them), I think you're missing the biggest trend that's going on," Harrison said. "Being able to understand the value of nature, helps you understand the value of businesses."
Schroders had £724.3 billion ($885.1 billion) in assets under management as of Sept. 30.
BlackRock, the largest asset management firm in the world with $9.1 trillion in assets under management, has pulled back from its once-loud endorsements of ESG investing. The firm's CEO Larry Fink said in June he will no longer use the term because it has become "entirely weaponized," making him "ashamed" to be part of the debate.
Fink's embrace of ESG investing landed both him and his company in hot water with politicians and activists on both sides of the political aisle. Last year, BlackRock began receiving probes and subpoenas from red-state politicians questioning the firm's investing practices, and lost $4 billion in investment mandates from Republican states like Florida and Louisiana.
Harrison and the Schroders Americas CEO, Phil Middleton, said that their firm had also received letters and inquiries from state regulators regarding their ESG investments, but denied that any mandates had been lost because of it.
Harrison said that, though he understood that ESG investing was politically-divisive in the U.S., it wasn't so in the rest of the world.
"If you're a wealth advisor sitting in a regional office somewhere (in the U.S.), probably the last question you want to ask somebody is their view on sustainability because you enter into a very sensitive area," Harrison said. "That issue is quite different elsewhere in the world. In fact, in the U.K. we have a regulatory obligation to ask people what their views are."
