The Role of Asset Management in Promoting Sustainable Finance and ESG Standards: Industry Implications and Prospects

Segun Kehinde; Chinonye Moses; Borishade Taiye; Kehinde Oladele; Busola Simon-Ilogho; Tola Kehinde

doi:10.59890/ijaeam.v1i3.446

Authors

Segun Kehinde Department of Business Management, Covenant University
Chinonye Moses Department of Business Management, Covenant University
Borishade Taiye Department of Business Management, Covenant University
Kehinde Oladele Department of Business Management, Covenant University
Busola Simon-Ilogho Department of Business Management, Covenant University
Tola Kehinde Department of Business Management, Covenant University

DOI:

https://doi.org/10.59890/ijaeam.v1i3.446

Keywords:

Asset Management, Sustainable Finance, ESG Standards, Decision Making

Abstract

This paper reviews the literature on how asset managers can integrate ESG factors into their decision-making processes, products and services, and how they can influence corporate behavior and public policies on sustainability issues. The paper also discusses the main challenges and opportunities for asset managers in this field, such as data availability and quality, regulatory frameworks and incentives, stakeholder expectations and engagement, and innovation and collaboration. The paper concludes with some recommendations for future research and practice on how asset management can enhance its role in supporting sustainable finance and ESG standards.

References

AMAS (2022). Sustainable Finance – AMAS Introduces New ESG Self-regulation. Available at: https://www.mondaq.com/fundmanagementreits/1234630/sustainable-finance-amas-introduces-new-esg-selfregulation

Antoncic, M., Bekaert, G., Rothenberg, R. V., & Noguer, M. (2020). Sustainable investment- exploring the linkage between alpha, ESG, and SDG's. ESG, and SDG's (August 2020).

Baines, J., & Hager, S. B. (2022). From passive owners to planet savers? Asset managers, carbon majors and the limits of sustainable finance. Competition & Change, 10245294221130432.

Braun, V., & Clarke, V. (2006). Using thematic analysis in psychology. Qualitative Research in Psychology, 3(2), 77-101.

Brühl, V. (2021). Green Finance in Europe–Strategy, Regulation and Instruments. Center for Financial Studies Working Paper, (657).

Cerchiaro, D., Leo, S., Landriault, E., & De Vega, P. (2021). DLT to boost efficiency for Financial Intermediaries. An application in ESG reporting activities. Technology Analysis & Strategic Management, 1-14.

CFA Institute (2021). Global ESG Disclosure Standards for Investment Products. Retrieved from https://www.cfainstitute.org/en/ethics-standards/codes/esg-standards

Climate change and sustainable finance | FCA (2023). Retrieved from https://www.fca.org.uk/firms/climate-change-sustainable-finance

D’Orazio, P., & Valente, M. (2019). The role of finance in environmental innovation diffusion: An evolutionary modeling approach. Journal of Economic Behavior & Organization, 162, 417-439.

Driessen, M. (2021). Sustainable Finance: An Overview of ESG in the Financial Markets. Sustainable Finance in Europe: Corporate Governance, Financial Stability and Financial Markets, 329-350.

EFAMA (2020). Sustainable Investment in the European Asset Management Industry: Setting a Baseline for Market Practices Across Investment Approaches. Retrieved from https://www.efama.org/sites/default/files/files/Market%20Insights%20Issue3%20ESG%20strategies%20%281%29.pdf

ESG and Sustainable Finance - KPMG Global (2020). Retrieved from https://kpmg.com/xx/en/home/insights/2020/10/esg-and-sustainble-finance.html

EU (2019). What is sustainable finance? Retrieved from https://ec.europa.eu/info/business-economy-euro/banking-andfinance/sustainable-finance/what-sustainable-finance_en

EU (2022). Corporate Sustainability Reporting Directive. Available at: https://ec.europa.eu/info/business-economy-euro/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en

FCA (2023). Climate change and sustainable finance. Available at: https://www.fca.org.uk/firms/climate-change-sustainable-finance

FINRA (2019). ESG Investing—Clearing the Air on Social Impact Financial Products. Retrieved from https://www.finra.org/investors/insights/esg-investing-clearing-air-social-impact-financial-products

Friede G., Busch T., Bassen A. (2015). "ESG and financial performance: aggregated evidence from more than 2000 empirical studies". Journal of Sustainable Finance & Investment 5(4): 210-233.

Gonzalez, C. I. (2021). Overview of global and European institutional sustainable finance initiatives. Banco de Espana Article, 30, 21.

Guo, R., Lv, S., Liao, T., Xi, F., Zhang, J., Zuo, X., & Zhang, Y. (2020). Classifying green technologies for sustainable innovation and investment. Resources, Conservation and Recycling, 153, 104580.

Hillowle, M., & Warui, F. (2021). Innovative Banking Practices and Financial Performance of Commercial Banks in Kenya. International Journal of Current Aspects in Finance, Banking and Accounting, 3(1), 41-53.

Hübel, B., & Scholz, H. (2020). Integrating sustainability risks in asset management: The role of ESG exposures and ESG ratings. Journal of Asset Management, 21(1), 52-69.

Imerman, M. B., & Fabozzi, F. J. (2020). Cashing in on innovation: a taxonomy of FinTech. Journal of Asset Management, 21, 167-177.

J.P. Morgan Asset Management (2020). ESG integration. Retrieved from https://am.jpmorgan.com/gb/en/asset-management/liq/investment-themes/sustainable-investing/ESG-integration/

KPMG (2020). ESG regulatory insights on environmental social governance topics on horizon. Retrieved from https://kpmg.com/xx/en/home/insights/2020/10/esg-and-sustainble-finance.html

Kuhn, B. M. (2022). Sustainable finance in Germany: mapping discourses, stakeholders, and policy initiatives. Journal of Sustainable Finance & Investment, 12(2), 497-524.

Liang, H., & Renneboog, L. (2020). Corporate social responsibility and sustainable finance: A review of the literature. European Corporate Governance Institute–Finance Working Paper, (701).

Mondaq (2020). Sustainable Finance – AMAS Introduces New ESG Self-regulation. Retrieved from https://www.mondaq.com/fund-management-reits/1234630/sustainable-finance-amas-introduces-new-esg-self-regulation

Ndung’u, D. T. (2022). Environmental, Social and Governance Reporting (ESG) Post-Covid-19: An Emerging Trend. AfricaGrowth Agenda, 19(3), 18-21.

NYU Stern Center for Sustainable Business (2021). Research Highlights. Retrieved from https://www.stern.nyu.edu/experience-stern/faculty-research/new-meta-analysis-nyu-stern-center-sustainable-business-and-rockefeller-asset-management-finds-esg

Popescu, I. S., Hitaj, C., & Benetto, E. (2021). Measuring the sustainability of investment funds: A critical review of methods and frameworks in sustainable finance. Journal of Cleaner Production, 314, 128016.

PRI (2018). What is ESG integration? Retrieved from https://www.unpri.org/esg-issues/what-is-esg-integration/271.article

Redondo Alamillos, R., & de Mariz, F. (2022). How Can European Regulation on ESG Impact Business Globally?. Journal of Risk and Financial Management, 15(7), 291.

Schumacher, K., Chenet, H., & Volz, U. (2020). Sustainable finance in Japan. Journal of Sustainable Finance & Investment, 10(2), 213-246.

Sciarelli, M., Cosimato, S., Landi, G., & Iandolo, F. (2021). Socially responsible investment strategies for the transition towards sustainable development: The importance of integrating and communicating ESG. The TQM Journal, 33(7), 39-56.

TCFD (2017). Final Report: Recommendations of the Task Force on Climate-related Financial Disclosures. Available at: https://www.fsb-tcfd.org/publications/final-recommendations-report/

Urban, M. A., & Wójcik, D. (2019). Dirty banking: Probing the gap in sustainable finance. Sustainability, 11(6), 1745.

Zeidan, R. (2022). Why don't asset managers accelerate ESG investing? A sentiment analysis based on 13,000 messages from finance professionals. Business Strategy and the Environment, 31(7), 3028-3039.

Zumente, I., & Bistrova, J. (2021). Do Baltic investors care about environmental, social and governance (ESG)?. Entrepreneurship and Sustainability Issues, 8(4), 349.