The largest number of ESG funds on distributors’ recommended lists are domestic equity funds. Research heads advise that they need certain strategies to fill gaps in their ESG product offerings (i.e., home office platforms don’t need more U.S. large cap equity ESG strategies).

• CIO heads and model makers that we interviewed revealed are looking for small cap, international, emerging markets, fixed income, and thematic/impact strategies to round out their ESG fund lists.
• In addition to getting through investment performance, fee and other filters, ESG fund managers must pass the so-called “greenwashing” test. Manager research teams take seriously the job of scrutinizing managers that position their firm or select funds as ESG integrated in order to validate  their claims. As one research professional stated “we scour marketing materials and pitchbooks, and the manager’s annual sustainable investing report to look for inconsistencies.”

Number of Investment Strategies Reviewed by Due Diligence Teams