Hedge funds increasingly are moving toward screening for environmental, social and governance investing, according to a new study by Backstop BarclayHedge, a financial technology and research firm. In fact, 41% of those survey stated they do take ESG into account when selecting equities for portfolio inclusion. And this is nothing new: those who do use ESG on average have been including it for six years.
The number of funds that plan to implement ESG into their methodology next year jumps to 58%, BarclayHedge found, noting “the trend is consistent with reports that ESG investing grew at record levels during this year’s first quarter.”
Sol Waksman, president of Backstop BarclayHedge, told ThinkAdvisor he wasn’t too surprised by the results. “Big picture, based on the survey as well as newsletters I read, more investors are looking at ESG for their portfolio holdings. I don’t know if it’s become a movement, but people are focused on it now.”
On average, of those hedge funds using ESG as a screen, 52% of assets are allocated based on ESG ratings. Further, 41% of those that use ESG as a screen indicated it factored into 100% of their asset allocations.
The study also found that of those hedge funds that use ESG for screening, 62% use it for both long and short positions, while 38% use it only to screen for long positions.