Institutional investors are planning to shake-up their asset manager lineups based on environmental, social and governance (ESG) standards, according to new report from Coalition Greenwich – Delivering on ESG.
This is the fifth market study the consultancy has conducted with institutional investors examining their preferences, perspectives, and future plans for employing ESG.
It polled 305 key investment decision makers at large institutional investors across North America, Europe, and Asia.
The study found that 73% consider ESG important in manager selection but this varies according to region, with Europe out in front at 87% in Europe while North America is lagging far behind at 49%.
Overall, just over half of current ESG investors expect to make manager changes on over 10% of their portfolios in the next five years due to ESG considerations.
As for communication, asset managers on the whole scored poorly. Only 6% of investors rated managers ‘excellent’ at imparting and evidencing their ESG approaches.
There were also regional differences in integration with a total of 75% employing ESG criteria into their investments. Again Europe was significantly higher at 92% than North America which stood at a much lower 53%.
However, the study showed that almost 70% plan to increase ESG integration/allocation in next three years.
Broken down by asset class, equities are most in need of ESG alignment, followed by fixed income.
As for specific areas of focus, climate change diversity, equality and inclusion (DEI) and business ethics were seen as important themes under the pillars of E, S and G.
