‘More to come’: Schroders targets impact and thematics in ESG launch plans

In response to a spike in client demand for ESG-linked products, Schroders is looking to bring new funds to market as soon as “late summer”, according to head of UK intermediary Doug Abbott.

In October, Abbott told Investment Week that Schroders was planning to introduce “a range of strategies in [the sustainability] area into the UK market” within global equities, but particularly the UK equity space, “which is where most clients in the UK seem to be allocating at the moment”.

Since then the firm has launched three unit trusts, including the Global Sustainable Growth (GSG) and Global Energy Transition funds, as well as bringing two investment trusts to the market.

Speaking recently, Abbott promised there is “more to come” in 2021, with Schroders “looking to bring some more sustainable options to the market… towards the late summer”.

“There is an ongoing programme focused on areas such as value-oriented ESG strategies and regional-oriented ESG strategies you are likely to see from Schroders,” he said.

Abbott explained Schroders has seen growing demand from UK clients for a “broader range” of sustainability-linked funds, particularly within regional equities and thematic portfolios.

In terms of thematics, Abbott identified renewables and carbon reduction-related funds as “really striking a chord with investors”.

“Our client base is saying ‘global equities are becoming quite well served [in terms of sustainability] and we want either some style diversification, more regional approaches focused on sustainability or we want more in other asset classes’,” he added.

“There is also a lot more work to be done in areas like fixed income and credit.

“Those are the areas where we are really in the research and development stage for products that would suit our clients well.”

In addition, Abbott highlighted Schroders’ investment in emerging markets impact investment manager Blue Orchard as an example of an area where the firm would “like to do more”.

“Impact investing is an area that is developing beyond institutional, and we are trying to bring these types of investment approach to smaller and intermediary investors,” he added.

“Schroders is definitely interested in developing in this area, as well as working to build understanding of impact investing beyond institutional clients.”

Building ESG credentials

Last year saw Schroders complete the process of integrating ESG processes across its £574.4bn of assets under management.

Abbott explained that Schroders has embraced an “overarching philosophy”, whereby investments are analysed beyond the traditional areas of return and risk-adjusted return, with “impact risk” a “third dimension” added to its processes.

He explained: “It is about asking ‘what does this company or this investment do in terms of its impact on everything – its stakeholders, customers, suppliers, employees and the environment, for example?’.

“We ask ‘what is the cost of that?’, and that is very much a part of our investment process these days and something we want to be known for.”

As a result, Schroders’ product development plans are focused on client demand and “alignment with what impact clients think [funds] should have”, according to Abbott.

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