When did you first meet with term ESG? What were your first thoughts about it?
I first came across the idea in 2006. An investment manager colleague of mine watched Al Gore’s film An Inconvenient Truth, which made a big impression on him. It was then that he started to work on a thematic investment fund that invests in equities of companies that counter the effects of climate change. The fund was finally launched in 2008, although it did not have ESG certification at the time, but it has of course since obtained it. As head of communications, I needed to know the fund in detail, the investment story, the sectors and companies targeted, so that I could communicate this information properly to investors. I must admit that I was also fascinated by the idea.
You are working at the biggest fund management company in Hungary – how important is it for the asset management sector to be involved in ESG and impact investing?
Very important. There is a legislative and regulatory expectation at EU level, but I think most market players are aware that sustainability considerations need to be given due weight in the investment decision-making process. In the case of developed market investments, this is a much simpler task, as listed companies there have ESG reporting obligations, which are made available in a structured format by the major international reporting and rating platforms. The challenge is really in emerging markets, where there is plenty of room for improvement in ESG compliance and disclosure.
I assume it is difficult to balance between the “normal” fund management standards and the new ESG driven regulations. Is there a story or anecdote you would like to share which could give us a little insight about the challenges and/or the rewards of your daily work?
It is an interesting experience that, although EU rules apply uniformly to all, they are interpreted differently by different national supervisory authorities. To obtain an ESG rating for an investment fund, we have to meet different requirements in Hungary or, for example, for one of our subsidiaries in Central and Eastern Europe.
I know you will attend another important event on the 11th of October, just before the CEE Impact Day. Could you tell us a little bit about it?
We are celebrating the 30th anniversary of OTP Fund Management, almost the same age as the domestic investment fund market. Although on anniversaries like this we tend to look back a little, perhaps we should look forward. The world is changing very fast and we need to respond to these challenges just as quickly. Sustainability is a key part of this.
What are the main trends you are expecting in the fund management sector regarding ESG? Where do you think there is still room for improvement?
Looking further west, it is almost expected that an investment fund should be ESG rated. In Scandinavia, a fund that is not sustainable is simply unsaleable. I think this shows how much room for improvement there is for us.
