Bfinance: 89% of asset managers report significant increase in ESG spending

ESG Spending on the Rise Despite Fee Disagreements, Bfinance Study Finds

The landscape of sustainable investing is evolving rapidly, with a recent study by Bfinance shedding light on the shifting attitudes towards ESG spending and fees within the industry. While sustainable investing has faced challenges in recent years, the research shows that ESG spending has significantly increased for a majority of asset managers.

One of the key findings of the study is the disparity in beliefs between asset managers and retail investors when it comes to pricing strategies based on ESG resourcing requirements. While nearly 70% of investors believe that strategies should be priced comparably across different ESG ratings, only half of asset managers share this belief. Additionally, there is a regional divide, with US fund managers less likely to support higher pricing for strategies with higher ESG resourcing compared to their counterparts in France and Germany.

The study also highlights the debate around including ESG charges as part of the management fee for funds. While 91% of investors support this idea, only around 70% of asset managers agree. This discrepancy is even more pronounced in the private equity and real estate sectors, where less than 50% of asset managers believe ESG fees should be included in management fees.

As costs continue to rise, asset managers are faced with tough decisions on how to navigate fee structures. The report suggests that asset managers may need to absorb additional expenses at the firm level, pass them on to clients, or implement strategy-specific fees for clients that make heavier use of ESG resources. These decisions could impact fee compression in the industry and make pricing strategies more complex.

The study also notes a lack of fee reductions across asset classes, except for in the real estate sector where median management fees have decreased. This presents an opportunity for investors to negotiate or renegotiate fee terms in the real estate market.

Overall, the study highlights the challenges and opportunities in sustainable investing, particularly in relation to ESG spending and fee structures. As the industry continues to evolve, asset managers will need to adapt to changing investor preferences and market dynamics to remain competitive.

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