ESG is everywhere. That’s a fact. But even with its ubiquitous nature, not every type of client need is being met.

Now, we’re not expecting a deluge of new products to flood the market, but we have canvassed fund buyers from across Europe to understand what they feel is missing.

Quick takeaways

• There’s always room to do better on green bonds.
• Think thematically – overarching ideas are too common.
• Don’t be afraid to offer pragmatic ideas.

So, what do fund selectors think is a priority in this field and how can asset managers get there, especially when it seems like many of the bases are covered?

‘I think there are a couple of areas that are under-represented in the fund offering within ESG and sustainability,’ Ewout van Schaick, head of multi-asset at Dutch group NN Investment Partners.

‘More on the fixed income side – so both high-yield and emerging market debt. I think there is still room for new fund launches in those areas,’ he added.

Van Shaick, whose remit includes fund of funds, encouraged asset managers to be bold when looking at how they are approaching ESG from a fixed income point of view.

‘Another category where I think there is further growth in ESG is in the more-illiquid asset classes. So illiquid debt, maybe private equity and I think there is room for more sustainable strategies there.’

Sticking with fixed income, Bas Gradussen, a senior portfolio manager for socially responsible investment at InsingerGilissen Bankier, said his firm had worked with several providers in recent years to develop new ideas, which include a US-focused green bond fund.

‘We launched that fund last year but we are also keen to develop an EM one, he said. His interest would also be piqued by a recycled gold strategy. ‘That would be an interesting way to bring sustainability to that area of the market.’

Having worked with companies to develop green bond funds, Anh Nguyen of Nagelmackers believes there is untapped potential in thinking along more structural lines. The senior fund manager said companies need a way in which to stand out as fund launches intensify.

‘With the growing competition, there is less and less space for new ideas and new funds. But, for example, a thematic fund that is ESG and more sector-orientated, like a transport fund with an Asia focus. That is one example of something that doesn’t yet exist. We need to think about sectors.’

Other selectors were less specific on exact strategies but more on the intention or approaches asset managers should use in trying to meet ESG needs.

‘When selecting funds in a sustainability-heavy area, we try to make comparisons that are apples to apples,’ said Jurgen Muijs van de Moer, a senior portfolio manager at Blue Sky Group. ‘That is one way I can think to help prevent greenwashing, we look for transparency and have the discussion with the fund manager and the sustainability team if they are.’

Muijs van de More said it was important to be able to clearly explain the ESG idea to his clients, and he would want to see more strategies that are specifically targeted at clusters of the UN’s Sustainable Development Goals, rather than the broad-brush approaches.

While it may be a familiar cry to several of those pitching products, the (over)emphasis on the E of ESG is becoming more noticeable.

Guy Janssens, who is head of investment specialists at BNP Paribas Fortis, believes truly different ideas, especially concerning the Sustainable Financial Disclosure Regulation, are harder to find.

‘I would want an Article 9 on human capital, which is very difficult to find today. Today, it is very difficult because the taxonomy is so focused on the environmental, [side] so I am curious what is possible on the societal side through Article 9.’