Investment fees and costs associated with ESG resourcing should be re-evaluated, according to a whitepaper published by independent investment consultancy firm bfinance. The research, which assessed more than 650 asset owners and managers, noted that nine in ten asset managers have increased their ESG-related spending relative to other spending over the past three years. This has likely been driven by factors such as costly climate-related data and mounting regulatory requirements, bfinance said. Although two-thirds of asset owners said ESG resourcing should not affect a strategy’s price, fewer than half of asset managers agreed. Meanwhile, 42% of asset owners said they were satisfied with the level of transparency from their asset managers on ESG-related costs. The report considered escalating ESG expenses alongside slow-to-adjust hurdle rates for alternative investments and a renewed focus on generating savings. More broadly, bfinance noted that fixed income fees in public markets have compressed since the pandemic, yet higher interest rates and positive flows into investment grade bonds have eased pressure on active managers. “For investors, improvements on fees and costs can deliver the ideal outcome: additional performance with zero additional risk; risk-free alpha, in other words,” said Duncan Higgs, Head of Portfolio Solutions at bfinance. “However, delivering savings is not straightforward, especially after more than a decade of cost scrutiny driven by both investors and their regulators. It can be difficult for investors to access cost comparisons that are suitably specific and customised: simplistic benchmarking can often be too generic.”
