An overly prescriptive approach isn’t necessarily the best way, and hedge funds dread exclusion lists, said Jarkko Matilainen, the former director of hedge funds at Finland’s Varma Mutual Pension Insurance Co. He said ESG isn’t that relevant for short-term investors who trade in and out of positions in hours and weeks. Rather than an outright ban on certain sectors, Matilainen prefers encouraging hedge funds to incorporate ESG risk assessment in evaluating potential investments.

Albourne decided to make answering ESG questions compulsory in its operational due diligence phase after the percentage of its clients considering such factors in allocation decisions doubled to 35 percent between 2016 and 2018. Albourne has been collecting such data since 2012.

“We’d never seen such a sharp increase between the two surveys,” Kennedy said.

This article provided by Bloomberg News.

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