Analysis: London signals clear intention to be worldwide responsible investment hub

The UK government has issued its clearest declaration yet of its desire to be a worldwide responsible investment hub – with City minister John Glen telling asset managers that ESG is a “golden opportunity” for an industry that is the “jewel of the crown” of UK finance.

Glen, a member of the ruling Conservative Party and whose title is officially the Economic Secretary to the Treasury, chairs the government-convened Asset Management Taskforce which is looking at all aspects of the sector.

Today he was at the inaugural Sustainability and Responsible Investment Conference of the Investment Association, the fund management industry group which represents £7.7trn (€8.9trn) in assets.

The IA, whose traditional focus has been on corporate governance rather than responsible investment/SRI, has in recent years turned its focus on the sector.

It said earlier this year that it wanted to double overall AUM to £15trn over the next decade and cement its role as a global investment management hub.
The UK’s tradition of corporate governance and stewardship would play a part in this, it is hoped.
Feeding into this also would be the development of a UK product label: A proposed voluntary label to assist retail investors and their advisers to easily identify funds which have adopted a sustainable investment approach.

“This is a golden opportunity for the sector, the City [finance district] and the wider economy,” Glen told delegates today. He said ESG was “not just a social imperative but a financial one also”.

He identified green finance and social impact investment as particular elements to focus on.

The UK should “indisputably” aim to be the hub of green finance.

Earlier this year he said: “Stewardship and responsible investment is an area the UK has yet to fully take advantage of, so I’ve challenged the Taskforce to find ways in which we can tap into that growing market and enhance our position as a world leader in asset management.”After leaving today’s event to go to Westminster, he tweeted: “I want the UK to be the preeminent global hub for #greenfinance. The @InvAssoc is embracing this challenge and was great to speak at their conference about how govt can support this excellent work around sustainable and responsible investment.”

But the UK will not have things its own way, despite such endorsements. There are numerous other financial centres looking to win asset management/responsible investment business – especially in the light of Brexit.

“I want the UK to be the preeminent global hub for #greenfinance”

Finance centres ranging from Frankfurt, Hong Kong and Paris and many more besides are all eyeing the role of ‘global ESG hub’. At stake are not just current assets but the assets of the future owned by the ‘millennials’ who are seen as being more engaged in environmental and social issues than their forebears.

But a panel of senior asset management figures that followed Glen’s speech played down fears of asset flight to other centres such as Luxembourg and Dublin; Glen pledged that the UK would work with the European Union, with its new Sustainable Action plan, “on our shared goals”.

Chris Cummings, the IA chief executive, echoed Glen’s ambition for the UK to be a “global centre for SRI” and called the minister the “right person at the right time”.

Elizabeth Corley, the former CEO of Allianz Global Investors, chairs an advisory group looking at social investment. Speaking on the panel, she pointed out that the UK is well placed on the ‘E’ and ‘G’ of ESG but weaker on the ‘S’ side of things.

She pointed to UK initiatives such as the Patient Capital Review and the review of fiduciary duty as evidence of the progress that is being made.

The panelists supported Glen’s vision, although Saker Nusseibeh of Hermes — which is now US-owned — said the UK shouldn’t be complacent about its perceived ESG leadership over the US.

The US, he said “will click” that this is a growing sector – and it would move from “full stop to full speed”.