The events of 2020 — Black Lives Matter, expanding political chasms, the #MeToo movement, the forest fires in Australia and the West Coast of the US, and of course COVID-19 — have inspired an upsurge in social awareness. This is true among both individuals and corporations, as evidenced by the proliferation of CEO statements on events and issues making headlines including race and gender inequalities.
Social awareness is fueling interest in ESG money market funds. Our COVID-era survey found that 69% of cash managers believe integrating ESG into cash investments will be a mainstream practice within the next three years. Commonly cited drivers for this shift include client pressure and mitigating reputational and investment risks. Among the range of issues covered by ESG, clients tell us that diversity and inclusion has become a particularly strong focus.
For the moment, ESG funds remain small, and therefore subscriptions tend to be modest, due to allocation limits. Additionally, there is a significant opportunity for investor education, since ESG cash methodologies are relatively new. Some companies report researching ESG, but have yet to invest due to a lack of selection criteria. Given client interest in ESG cash, assets under management could increase significantly in the near future.