ESG becoming mainstream, challenges still exist: survey

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Market growth and success as growing green tree in shape of arrow © Aleksandr Khakimullin /123RF Stock PhotosThe movement towards sustainable investment strategies is increasing among asset managers and becoming standard, but there are still challenges, a recent survey by Aviva Investors’ multi-manager research team found.

Eighty per cent of managers have seen rising requests for bespoke ESG solutions, the survey found. As well, over 70 per cent of respondents incorporate ESG factors into 75-100 per cent of their funds’ investment processes—up from just over 50 per cent in 2014. And, 93 per cent of asset managers recognize growing appetite for sustainable investment solutions.

“ESG integration has become mainstream and, by itself, is no longer a differentiator,” said Isabel Emo Capodilista, head of multi-manager research at Aviva in a press release. “Our findings show investors want more tailored approaches as to how ESG can work best for them.”

The volume of investment managers integrating ESG considerations into analyst and fund manager remuneration has grown fourfold since 2014, to 42 per cent, the survey said.

When it comes to ESG integration approaches, 90 per cent of survey respondents cited engaging directly with companies. Other approaches include using third party research (83 per cent) and rating holdings on ESG (70 per cent).

The survey identified numerous challenges concerning ESG integration, including low senior leadership buy-in, the quality and readiness of data and difficulty measuring impact and understanding material ESG risks.

“The industry faces challenges around consistency of language and definitions of ESG,” Emo Capodilista said. “Addressing these would reinforce confidence in the products and services investors receive. While greater company disclosures and a better understanding of quantifiable ESG factors has resulted in an uptick in the quality and accuracy of data from the investment industry, further improvements should facilitate the future growth and development of ESG strategies.”

The survey was based on 61 responses from global fund management houses, representing a total of more than £16 trillion in assets.

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