WHEB Asset Management (WHEB), the impact investing pioneer with £1.2bn AUM, has unveiled its Impact Report for FY 2023 today. The report tackles head-on the thorny issues of ESG and sustainable impact funds’ outflows, the challenging performance environment, and the waning popularity of the sector during 2023.
It says “ESG tourists – asset managers that stampeded into the sustainability market just a few years ago – are now packing their bags” as the depth and breadth of anti-greenwashing regulation bites. This ‘market shedding’ of fund providers who do not have the staying power of dedicated impact and sustainable investment houses should provide clarity for financial advisers, fund selectors, and end clients.
George Latham, managing partner at WHEB Asset Management, says:
“After decades in the margins, sustainability investing enjoyed its place in the sun through 2018-22 but waned in prominence in 2023, as interest rates and the rise of artificial intelligence dominated investment narratives. This turbo-charged the performance of ‘mega-tech’ businesses like Amazon and Nvidia which we do not believe meet key criteria to be considered to provide a positive sustainability impact.
“Naysayers quickly pointed to recent volatility in Environmental and Healthcare services – large markets for sustainable and impact funds – as supposed evidence of failings in sustainable investing, rather than the typical behaviour of a market cycle. Compared to AI, it’s not currently a sexy story to tell that companies are getting on with delivering carbon reductions, diversifying their senior leadership and employee base bit-by-bit, but that progress is occurring nonetheless.”
“As a result, ‘ESG tourists’ – asset managers that stampeded into the sustainability market just a few years ago – are now packing their bags. This, along with the huge swell of anti-greenwashing regulation, is clarifying the investment offer for retail and institutional investors alike. As our long expertise in sustainable investing and deep roots in the impact investing movement attest, we will be staying the course – and expect our investors to benefit financially in the long term as a result.”
The investment horizon for the £723m FP WHEB Sustainability Fund is typically greater than five years, with an average holding period for companies in the portfolio of over seven years. The report highlights the benefit specialist investors with deep knowledge and experience bring to sustainability issues, reassuring investors of their staying power as true long-term investors.
WHEB’s Impact Report provides transparent reporting on the real-world outcomes of its social and environmental investments alongside financial performance. Click here for full 2023 Impact Report Findings
WHEB Asset Management’s FY 2023 Impact Report also reveals that a greater focus on engagement by asset owners and regulators has “unintentionally fuelled a Stewardship Stampede” by asset managers. While it is welcome that investment managers have intensified their engagement activities and are showcasing their related disclosures, WHEB’s impact report highlights concerns that “an excessive focus on metrics… does not adequately capture the depth or nuances of meaningful stewardship that will influence real-world outcomes”.
To combat this, WHEB has baked into its investment process transparently how it exercises stewardship responsibilities and the outcomes that are correlated with this engagement (see detail in the Impact Report chapter here).
UK asset managers that want to use the term ‘impact’ in the naming and marketing of their funds will be required from December 2024 to evidence the impact of their investments and business practices. WHEB Asset Management has spearheaded this for the past decade.
Seb Beloe, head of research and partner at WHEB Asset Management, says: “We have operated an impact investing strategy for nearly 20 years, back when ‘ESG’ was a new term and a decade before the UN Sustainable Development Goals, SDGs, were created.
“We provide a radical level of transparency across our investment strategy and have previously called on the industry to voluntarily follow suit. With many new entrants rushing into the market, we welcome the FCA’s introduction of SDR to thwart widespread greenwashing in the sector and force the level of impact reporting we have championed for over a decade.
“At WHEB we passionately believe that asset management can be a powerful tool for turning the tide on climate change as well as other critical social and environmental issues. It is a privilege and a responsibility for sustainable asset managers to invest on behalf of our clients in this way. It is also crucial that they are able to trust that their capital is indeed being deployed to tackle climate change and support the development of a more sustainable economy.”
