Survey Shows Asset Owners Want ESG Costs Recorded as Management Fees

A new survey has determined that most asset owners believe that charges related to environmental, social and governance (ESG) should be part of management fees. The survey was conducted by bfinance, an independent and privately owned financial services and consultancy company.

The company surveyed more than 400 asset managers across 31 nations, making up more than $50 trillion in assets under management. It also surveyed 225 asset owners from 32 nations in the world, representing more than $4 trillion in assets. Of this number, 43% are pension funds.

The company determined that 89% of asset managers had increased spending related to ESG in comparison to other costs. The report also found that asset managers needed to traverse available paths as costs rise. This may include absorbing surplus expenses at the company level or passing them to their extensive client base.

Over two-thirds of asset owners who took part in the survey admitted that strategies that had more ESG resourcing requirements needed to be delivered at a similar price to those with lower resourcing requirements. The survey determined that only 58% of asset managers agreed with the above statement, with only 10% of them strongly agreeing. Views on this statement also varied across asset classes with 32% and 75% of real asset managers and fixed income managers warmed to the statement, respectively.

The survey also observed geographical distinctions, noting that unlike their American counterparts, managers domiciled in Europe were considerably more likely to agree that strategies with more ESG resourcing should be more expensive. For instance, this figure stood at 79% and 72% for France and Germany respectively but only 46% for the United States.

The survey also raised a question on whether all costs related to ESG needed to be part of management fees or whether it was more appropriate to separate these charges. The results were varying, with 49% of managers who operate solely in private markets saying the charges should be reported as management fees.

On the other hand, 82% of participants from companies that solely manage public market assets were of the opinion that all charges needed to be part of management fees.

The survey also asked investors with ESG strategy experiences to discuss whether higher resourcing requirement strategies were provided at the same price as strategies with lower resourcing requirements.

The findings showed that about 51% of asset managers agreed with the above statement, highlighting a gap between perceptions of what’s appropriate and the practical experiences of investors.

The survey also called attention to an issue with transparency, which means it could be hard for investors to evaluate whether what they’re paying for can be compared to the competition.

Different players in the economy, such as Coyuchi Inc., need to standardize the way in which they report ESG costs so that there is a verifiable way to track such expenses and assess their benefits to the company, the community and the environment.

NOTE TO INVESTORS: The latest news and updates relating to Coyuchi Inc. are available in the company’s newsroom at https://ibn.fm/COYU

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