BNP Paribas Survey: 40% of Hedge Funds in Survey Consider ESG Factors in Investment Process
29th October 2020 | Hong Kong
BNP Paribas has released a survey if Hedge Funds had included Environmental, Social and Governance (ESG) considerations in their investment process.
” 40% of 53 Hedge Funds with more than $500 billion has included ESG consideration in investment process “
53 Hedge Funds with a combined AUM (Assets under Management) of more than $500 billion participated in the survey by BNP Paribas.
BNP Paribas ESG Survey with Hedge Funds
In the BNP Paribas Survey results, 40% of the 53 Hedge Funds has included Environmental, Social and Governance (ESG) considerations in their investment process.
The survey highlights that hedge funds are reaching a tipping point of incorporating ESG into their decision making, and more than half (57%) of hedge funds in the survey will integrate ESG considerations no later than 2022.
1. Tipping Point & Drivers:
- 40% of Hedge funds integrate ESG into their investment process
- 71% of Hedge funds are being driven by client demand
- 67% of Hedge funds catered to investor requirements
A variety of ESG investment styles have also been added to traditional hedge fund strategies. ESG integration is reaching a tipping point and by mid-2022, more than half (57%) of surveyed funds will be incorporating ESG into their investment process.
2. Characteristics Challenges
- 60% of Hedge funds do not currently integrate ESG
- Hedge funds remain sceptical that ESG-related products/data sets can improve risk-returns
- Questions remain if ESG can be successfully combined into existing hedge fund investment strategies
3. Barriers
- Only 48% of Hedge funds are driven by the belief that it will improve their risk-return profile.
- 67% of Hedge funds cite social factors as the most difficult to analyse and incorporate
- There is an ‘action gap’ between the familiarity of sustainable products and uptake by Hedge funds
4. Corporate sustainability
Hedge funds are becoming increasingly aware of their responsibilities to the environment and society.
- 55% of Hedge funds use ESG principles in the management of their companies driven by firm leadership
- 62% Hedge funds are measuring their operational carbon footprint.
5. Mainstreaming in the future
- 50% of Hedge funds believe there will be increased demand for ESG-integrated investments post COVID-19
- 85% of Hedge funds integrating ESG expect more regulatory disclosure requirements in 2022, with the majority taking a greater role in ESG consultations.
Similar to the 2019 BNP Paribas asset managers and owners’ survey, social factors and data remain current challenges as 1 in 5 hedge funds do not integrate ESG due to lack of data.
BNP Paribas Global Head of Financial Institutions Coverage (FIC) Sandrine Ferdane:
“As we have seen across the investment landscape, hedge funds are evolving to integrate ESG into their decision making. It is clear that hedge funds are starting to measure and manage certain ESG considerations – especially within their operations.”
BNP Paribas Report Methodology
The research is based on a survey of 53 individual hedge fund management organisations along with in-depth interviews with prominent leaders from within the industry, conducted in spring/summer 2020. The global survey sample represents a broad cross-section of hedge funds, in terms of sizes, primary strategies, geographies, and client types. As a group, their combined AUM is over half a trillion dollars – approaching 20% of the total hedge fund industry’s AUM.
About BNP Paribas
BNP Paribas is a leading bank in Europe with an international reach. It has a presence in 71 countries, with approximately 199,000 employees, of which more than 151,000 in Europe. The Group has key positions in its three main activities: Domestic Markets and International Financial Services (whose retail-banking networks and financial services are covered by Retail Banking & Services) and Corporate & Institutional Banking, which serves two client franchises: corporate clients and institutional investors.
The Group helps all its clients (individuals, community associations, entrepreneurs, SMEs, corporates and institutional clients) to realise their projects through solutions spanning financing, investment, savings and protection insurance. In Europe, the Group has four domestic markets (Belgium, France, Italy and Luxembourg) and BNP Paribas Personal Finance is the European leader in consumer lending. BNP Paribas is rolling out its integrated retail-banking model in Mediterranean countries, in Turkey, in Eastern Europe and a large network in the western part of the United States.
In its Corporate & Institutional Banking and International Financial Services activities, BNP Paribas also enjoys top positions in Europe, a strong presence in the Americas as well as a solid and fast- growing business in Asia-Pacific.
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