While environmental, social and governance factors are a hot topic in the investment world, hedge funds are falling behind, according to new data from Preqin.

Currently, most hedge fund managers and investors don’t have an ESG policy in place. In fact, only 29 per cent of investors and 20 per cent of hedge fund managers do.

That being said, a further 20 per cent of investors are planning to put an ESG policy in place for their hedge fund portfolio in 2019.

In addition to the 20 per cent of hedge fund managers that do have an ESG policy in place, the data shows 15 per cent plan to implement a policy in 2019.

To put this into context, the report said that 53 per cent of private equity managers have an ESG policy in place and 15 per cent more plan to do so by the end of the year.

“Hedge funds clearly have some way to go to match other alternative assets when it comes to embracing and adopting ESG,” the report said.

Notably, 65 per cent of surveyed investors believe ESG will become more important to their hedge fund portfolios by 2023. There is a big gap as only 37 per cent of hedge fund managers believe the same.

“With the gap between investors and fund managers on the subject set to widen, it is likely that those hedge funds that embrace ESG considerations within their organizations may be the ones that are better able to tap into the expected growth in alternative assets.”