Responsible investment a 'deal breaker' in fund manager selection

Professional investors are not tolerating "weakness" or failure in the responsible investment space when selecting fund managers, research by Columbia Threadneedle has found.

Some 85% of professional investors believe responsible investment is a crucial part of manager selection, while 72% of institutional and wholesale investors said not meeting expectations was a "deal breaker" when considering asset managers that can help them meet their objectives.

Michaela Collet Jackson, head of distribution, EMEA, at Columbia Threadneedle Investments, said: "It's clear that professional investors will now avoid - or even divest from - asset managers that are not meeting their RI expectations, be it by way of product offering, investment approach or client reporting. This sends a very loud message."

Some 77% of those surveyed believe responsible investment is key to pursuing financial outcomes in portfolios, while 86% agree it is a fiduciary requirement.

Almost all respondents see responsible investment as a means to add value, enabling them to meet clients' evolving preferences.

The research also found that many investors are willing to divest from Article 6 funds if they are not changed to meet Article 8 or 9 requirements under the EU's Sustainable Finance Disclosure Regulation.

While three quarters would support a conversion from their existing Article 6 funds to Article 8 or 9, nearly half are willing to divest should these requirements not be me.

There was particularly strong demand for Article 8 equity funds (86%) and Article 8 fixed income funds (81%), but less interest in multi-assed or exclusion-based equivalents.

Demand for Article 9 - the most stringent of the SFDR classification - followed a similar pattern.

The most popular responsible investment or ESG themes for investors were global water (86%), climate change (83%) and biodiversity (77%).

Columbia Threadneedle Investments surveyed 110 professional investors across the UK, Singapore and Europe.