Ropes & Gray Attorneys Provide Insights on ESG Investing in The Hedge Fund Law Report

A recent two-part series in The Hedge Fund Law Report explores the development of environmental, social and governance (ESG) factors within investing and its growing prevalence in the hedge fund space. The series reviews guidance from industry experts on considerations for managers wishing to develop an ESG investment policy, as well as the due diligence demands from investors seeking investment managers that incorporate ESG factors into the investment process, and includes insights from securities & public companies partner Michael Littenberg and hedge funds partner Isabel Dische (both of New York). “ESG has garnered more attention recently, and some managers have begun to proactively inquire about ESG,” Mr. Littenberg described. “Currently, it appears that most hedge fund managers that have adopted an ESG investing policy with respect to some or all of their products have done so in response to requests from investors,” noted Ms. Dische. However, “for some hedge fund managers, ESG investing does not reconcile well with the investment strategy,” continued Ms. Dische, “either because of investment time-horizons or the underlying asset class.” The piece explains that to date, few hedge fund managers offer products where one of the primary investment objectives is to advance ESG issues. Those that do, noted Mr. Littenberg, “tend to be niche investment managers whose industry expertise happens to coincide with the agendas of certain ESG investors.”