Asset owners, asset managers and ESG

BNP Paribas has released its latest survey of institutional investor attitudes to ESG considerations, attempting to explore how institutional investors are embedding ESG principles and practices into their day-to-day activity.

The survey follows on from the 2017 version and explores whether the great expectations for ESG that they reported in that survey have come to fruition.

There is certainly growth in ESG investment interest with the number of asset owners/asset manager that have more than 25 per cent of funds invested in ESG/RI funds rising from 48/53 per cent in 2017, to 75/62 per cent in 2019. Furthermore, the respondents predicted that by 2021 the ration would be 92/90 per cent.

The motivations for investing are interesting, with 52 per cent stating that improved returns was a reason for using ESG criteria, 47 per cent saying it was to protect or enhance brand and reputation, and 37 per cent saying that reduction of risk was a reason.

Increasingly, asset owners and asset managers see responsible investing as a way to make a positive contribution to the United Nations Sustainable Development Goals (SDGs), with 65 per cent of respondents saying that their investment framework is aligned. For the first time, impact Key Performance Indicators are being built into investment frameworks too.

In terms of the barriers to progress, the major issues with integration of ESG factors into investment decisions were: lack of data (66 per cent), the costs of technology (32 per cent), the lack of reliable analytical skills (30 per cent) and the risk of greenwashing (21 per cent).

Looking in more detail at data, it can be seen that there are challenges in transforming data into insights include an issue with inconsistent data 32 per cent, confusion with the number of different, varied and conflicting ESG ratings (27 per cent), and ineffective data for scenario analysis at 22 per cent.

Analysing performance against non-financial factors requires different perspectives, and the survey indicates a growing tendency to upskill employees and create new jobs by recruiting from non-traditional backgrounds (from NGOs or consultancies).

All of which sounds good, but as ESG is gaining in importance (78 per cent of respondents stated that it plays a growing role or is integral to their strategy), there remains work to be done before organisations can say they are fully embedding it across their functions. Only a quarter of respondents feel that their organisation is able to integrate ESG strategy across all aspects of their operations and have transformed their operating model, investment approach and engagement strategies to embed ESG principles. Nearly a third (30 per cent) say that the ESG team sits independently of the investment team.

The findings are based on a global survey of 347 asset owners and managers whose organisations incorporate ESG, made up from 178 asset manager and 169 asset owners.

    Share Story:

Recent Stories