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Three investment management firms raise their ESG game

It’s been a busy week for JP Morgan, Goldman Sachs and Vanguard who have all made big moves to boost their ESG credentials, from key hires to bond debuts

|Feb 16|magazine9 min read

Last week, the second week of February, marked a productive one for global investment management companies in the sustainability space, with three big financial services firms announcing company firsts in the Environmental, Social and Governance (ESG) landscape.  

While Wall Street giant Goldman Sachs debuted its first-ever sustainability bond, JPMorgan and Vanguard announced senior ESG hires to fill brand-new roles – the former hiring high-profile UK Labour politician Chuka Umunna to lead its ESG work, and the latter snapping up ex London Stock Exchange Group executive Fong Yee Chan as head of ESG strategy for the UK and Europe. 

Pressure on investment firms to address ESG issues

While businesses across all sectors are addressing demand for ESG commitments, the financial services sector and investment management firms, in particular, have been a little slow off the sustainability starting blocks. 

However, with demand for ESG advisory services growing rapidly, asset managers like Legal & General and BlackRock are increasingly putting pressure on companies to address climate crisis, lack of diversity and other ESG issues. 

At the end of January, BlackRock CEO Larry Fink said the firm would take a tougher stance against corporations unwilling to provide a full accounting of environmental risks, part of a cluster of moves by the asset management firm to show it is doing more to address investment challenges posed by climate change. 

Among the moves, BlackRock said it would increasingly vote against management and boards if firms don’t disclose climate change risks and plans in line with key industry standards. 

With pressure mounting, awareness is turning into action and ESG in the investment landscape is starting to go mainstream with major firms making big moves.  

Increased ESG action in investment

Goldman Sachs’ debut into green bonds is a big sustainability statement and follows the company’s formation in October last year of a group focused on investment opportunities in clean energy, waste and sustainability industries. Worth US$800, the bond is likely to be used to finance loans and investments made in projects and assets such as clean energy, sustainable transport and financial inclusion. 

They aren’t the first though, and follow JP Morgan which entered the fast-growing market in September last year by selling US$1 billion such bonds, with four years maturity. 

JP Morgan believes ESG considerations are now having an impact on everything from corporate finance strategies and investment flows to day-to-day operational decisions with Marilyn Ceci, global head of ESG debt capital markets at JPMorgan, telling Bloomberg that the company expects the sustainable finance market to expand 49% by the end of 2021 compared with 30% project in October last year. 

And the firm is putting its money where its mouth is, creating a new senior sustainability position in the company and hiring ex UK shadow business secretary Chuka Umunna to fill it. 

According to a JPMorgan statement, Umunna will head up the company’s ESG consultancy team and “will work closely with the firm’s regional and global ESG stakeholders and partner with team across all lines of business to help our clients successfully navigate the evolving ESG landscape. 

Vanguard is also upping its ESG game, hiring an ESG executive in a newly created role to help accelerate the company’s efforts towards informing investors of its perspective on ESG topics. 

As head of ESG Strategy for the UK and Europe at Vanguard, Fong Yee Chan will be responsible for developing the US$7.1 trillion firm’s approach to ESG issues in Europe, ensuring it meets the needs of Vanguard’s clients.

“The ESG landscape is evolving rapidly with new regulation, an increasing number of investment offerings and different perspectives on the best way to approach EDG,” says Sean Hagerty, head of Vanguard, Europe.

What does ESG comprise?

Environment, Social and Governance (ESG) comprises a set of principles that touches on issues from diversity and board structures to labour relations, supply chain, data ethics, environmental impact and legal requirements. ESG investing is the investment in companies that score highly on the environmental and societal responsibility scales. 

Goldman Sach's Sustainability Bond
The February issue of Business Chief North America