The majority of a group of global asset owners representing more than £32.7 trillion assets under management have not yet fully implemented environment, social and governance (ESG) in their portfolios, according to Morningstar’s first Voice of the Asset Owner global survey.
The global quantitative study included 500 global asset owners from 11 countries included insurance, OCIO/multi-manager, family office and sovereign wealth, as well as pension funds.
Sixty-four percent managed more than $1 billion in assets, 36% over $10 billion and 12% more than $100 billion.
Respondents cited the main barriers to full implementation of ESG strategies were concerns over the impact on returns, lack of available products and reluctance of clients and stakeholders as top factors.
Despite this, the vast majority or 85% of said they believe ESG factors are material to investment policy, while 70% feel ESG factors have become more material in the past five years.
The study also found roughly two-thirds of allocators had seen a significant improvement in the quality of ESG data, ratings, indexes and tools available over the past five years although there is still room for the tools to improve.
Breaking it down, nearly half noted that ESG tools could benefit from more accuracy, while 42% pointed to better timeliness and 41% wanted to see greater objectivity of ESG data.
Respondents also pointed out that developments in regulation, data, reporting, analytical tools and investment processes appear to be interdependent, with each aspect shaping and being shaped by the others.
£As an ESG ratings, data and service provider, we embarked on the Voice of the Asset Owner survey to gain better insight into the needs of our asset owner clients,” said Morningstar Indexes Head of ESG Strategy Tom Kuh.
He added, “Findings show ESG considerations to be a major driver of asset owner investment policy, but we’re still far from full investment portfolio implementation. Probing this mismatch, our survey uncovered the reasons why ESG implementation is a slow roll.”
Kuh also noted that, “We were reminded through our discussions with asset owners of all shapes, sizes and approaches around the world that ESG investing is complex as well as diverse and is progressing at different speeds and stages.
We were also reminded that, despite their differences and the fact that each is on a different stage in their own ESG journey, asset owners are quite unified in their ESG commitment.”
This new multi-phase survey, conducted for Morningstar by Opinium in conjunction with Collie ESG, aims to gather insight into the evolving role of asset owners and the growing influence that ESG factors and sustainable investment considerations are having on the global market ecosystem.
