Cazenove, the wealth management arm of Schroders, has won a high-profile “ESG investing Olympics” event that aimed to find top sustainable fund managers, picking up a £33.5m mandate as its prize.
The company outclassed competition from 60 other investment groups to win over Friends Provident Foundation, the Joffe Charitable Trust and the Blagrave Trust, the three charities that held a public pitching battle to force asset managers “out of the shadows”.
The charities were impressed by Cazenove’s proposal to create a new sustainable growth fund, which will be launched later this year and will also be open to other investors.
Colin Baines, investment engagement manager at Friends Provident Foundation, said the charities would act as seed investors via their £33.5m commitment. He wants the fund to “set a new best practice” for environmental, social and governance investing.
“Hopefully [the fund] will scale quite quickly and help to establish what good looks like. There is so much greenwash in the industry,” he said, referring to the practice of asset managers proclaiming their green credentials publicly but not following this through in their investment practices.
He added that the charities planned to maintain their approach of “radical transparency”, sharing what Cazenove is doing well and speaking out about where it could improve.
While most pitches to win new investment clients take place behind closed doors, the charities defied convention and held a public event at the Royal Institution, the London science venue, in March. Asset managers were put through their paces in front of a 100-strong audience, which included representatives from other charities and foundations, as well as academics and non-profits.
The charities opened up the pitching process following concerns that opaque practices in the fund industry were making it difficult for investors to decipher which asset manager took ESG investing seriously.
Asset managers have rushed into ESG investing, which looks beyond traditional financial metrics, in recent years amid strong demand from investors. But there are long-running concerns that while many investment houses talk about the importance of sustainable investing, only a few are living up to their claims.
“The ESG investing Olympics has already enabled us to both get a wider sense of the market than would have been possible acting on our own, and to benefit from the expertise of others,” said Jo Wells, director of the Blagrave Trust.
In the autumn, Friends Provident Foundation will publish a “state of the sector” report, covering ESG market trends and gaps identified from analysis of the 60 proposals. Mr Baines said it was already clear that asset managers still had work to do on the social side of ESG, with many sustainable funds holding big companies with a reputation for tax avoidance.
Kate Rogers, co-head of Cazenove Capital’s charities division, said the ESG investing Olympics event broke “new ground in sustainable investing”.
“People are increasingly seeking to match their values with the way their money is invested,” she said.
The new fund will aim to “generate both a competitive financial return and a positive impact on people and planet”, Ms Rogers added, with a carbon footprint of less than half that of the global equity index.
It will be structured as a funds of funds, with the Schroders sustainable growth strategy as its largest holding. It will also invest in funds overseen by external managers, which under current plans include Wheb, Impax and Octopus.