Partner Insight: What are the challenges facing sustainable multi-asset?

We asked BMO's Simon Holmes and Paul Niven what drove the design of their new fund range

Two of the fastest growth areas in asset management - ‘multi-asset' and ‘sustainable' - are increasingly offered in one package. The idea is to offer investors the benefits of multi-asset fund ranges - cost-efficient diversification, active asset allocation and risk targets - alongside investment strategies that improve the world. Both aspects are likely to prove important amid the rethinking prompted by the Covid-19 pandemic.

"We all now want to see ourselves as good stewards of the planet and society and that includes multi-asset investors," says Simon Holmes, BMO's Director of Multi-Asset Solutions.   Paul Niven, BMO's Managing Director of Multi-Asset Solutions, who helped Holmes design BMO's new sustainable multi-asset range, agrees there is "growing recognition that not behaving sustainably can have financial consequences and that high-quality companies serving all stakeholders may produce better returns."

But BMO's commitment to sustainability - they launched Europe's first retail ethical fund back in 1984 - compelled the pair to tackle two big industry challenges as they designed the new range.

One challenge is to adopt the right mix of sustainable investment styles. There's an alphabet soup of sustainable approaches, ranging from excluding harmful industry sectors to ‘impact investing' in industries such as renewable energy. Each approach has its strengths but investors are often confused and need a clear story.

Another challenge is building consistency into investment processes across different asset classes. Holmes says it's been tempting for the industry to "take a bond fund and an equity fund and join them together," whereas "one needs to look through the whole portfolio to ensure the sustainability part is well-integrated across asset types," for example, in terms of how to define excluded investments. Getting this wrong could lead to charges of inconsistency and even ‘greenwashing' - the mislabelling of investments as greener than they are.

Click here to read how the BMO team tackled these two key challenges to build their multi-asset approach to sustainability.

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