HedgeNordic interview on ESG integration in the hedge fund industry

Commenting on the hedge fund industry’s ESG efforts, Hautamäki says that “hedge fund managers have been rather slow to integrate ESG principles into their investment process.” There are significant fundamental distinctions between different ESG approaches, partly compounded by the subjective judgments of data and ratings providers. “There is an enormous contrast in the methods being used. Generally speaking, many hedge fund managers are still quite vague in their descriptions of their ESG integration practices,” says Hautamäki.

“The lack of consistent and comparable data is an issue,” points out Hautamäki. “Transparency on interest alignment with respect to ESG KPIs may be limited,” he adds. “You have to have an extra level of skepticism about who is really incorporating ESG and there is obviously a risk of some greenwashing.” Even so, “the landscape is rapidly changing,” with hedge fund players showing characteristics of dynamism, innovation, and adaptability regarding ESG integration. “Strategies, such as equity long/short and event-driven, are better positioned to implement ESG principles within the investment process,” says Hautamäki. “But what we are seeing is that there is so much room for innovation and alpha generation.”