‘From niche to necessary’ – 5 takeaways from Alternative Investment Week

Will Wainewright, Founder, Alternative Fund Insight

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‘From niche to necessary’ – 5 takeaways from Alternative Investment Week

Will Wainewright, Founder, Alternative Fund Insight

Leaders and participants from the UK’s sustainable finance industry gathered in London this month for Alternative Investment Week, an annual conference organised by UKSIF. AFI was a media partner and moderated the panel on what sustainable allocators into alternative investments are looking for. Here were the key talking points at the event.

“From niche to necessary”
Niamh Whooley, a managing director and head of sustainable investing at Pemberton Capital Advisors, gave the opening keynote, focusing on how alternative fund managers had accelerated their moves into sustainable investing to meet allocator demand, which remains strong despite some more negative headlines in recent years.

That meant the sustainable agenda has moved “from niche to necessary” — and she pinpointed acceleration as a key theme, with the pace of ESG integration in alternatives faster than in any other segment of the market.

The data challenge
The allocator panel moderated by AFI featured Bianca Hanscombe, director of sustainable investing at Aviva, and Sophie Bajwa, investor relations at Impax Asset Management.

It was not the only session to analyse the challenges posed by data as allocators integrate sustainability factors into increasingly diverse portfolios. Data scarcity — and complexity — in private markets versus public is a major challenge, particularly given wide-ranging interpretations and priorities.

But sometimes the challenges should be seen not as roadblocks but as opportunities for engagement, the panel agreed.

A European opportunity?
Political changes in the US and an anti-ESG agenda in some states have brought new headwinds to the sector since the pandemic. Bajwa saw this as an opportunity for European fund managers to step in and meet the demand from investors, which remains strong, and potentially outshine US fund managers affected by the negative backdrop.

Some believe the idea of an American anti-ESG “backlash” has been overplayed. One attendee highlighted the example of New York’s $235bn group of pensions, which has been critical of BlackRock’s decision to withdraw from green alliances. The state comptroller Brad Lander highlighted BlackRock earlier this year as he said there had been “big steps backward” by some managers. “We have certainly let them know . . . how displeased we were about that.”

Capital flows
In the US, where state retirement schemes supportive of the sustainability agenda, like New York, and other countries around the world, there is still plenty of capital available for managers with the right policies and approach. Over 20% of the private capital fundraising is in sustainability-focused segments of the market, observed Whooley in her keynote.

Regulatory slowdown
The final panel of the day asked whether current sustainability regulation is fit for purpose in alternatives. UKSIF chief, James Alexander, was joined by Daniella Woolf, CEO and founder of Danesmead Advisory; Maximilian Kufer, head of ESG, for EMEA and private markets with Invesco; and Henry Kenner, an independent consultant, to look at the regulatory agenda in sustainability themes, which seems to have slowed down. The question is whether it remains adequate for more complex private market strategies outside of publicly-listed, long-held equities.