Do ESG hedge funds really exist? Yes, but…

ESG assets rose to $37.8 trillion at year end in 2020^[1] and in 2021 (to 31^st July), half of European ETF inflows have been to ESG funds.^[2]

The disparate and varied nature of hedge fund strategies and the assets they trade, as well as their ability to short-sell, somewhat ‘muddies the waters’ as far as ESG is concerned.

Hedge funds that pay proper regard to ESG do exist, but at present, investors need to look ‘under the bonnet’ in order to fully understand, monitor and quantify how ESG is integrated.

Allocators face several issues in this area of alternative investments, namely:

• greenwashing
• objectives obfuscation
• lack of transparency

There is a real opportunity cost to the planet from assets flowing to ‘Socially Responsible Investment’ (“SRI”) funds that are not true ESG funds.