Only 7% of asset managers said that environmental, social and governance (ESG) factors do not drive investment decisions according to Russell Investments’ 2023 Annual Manager ESG Survey, a sharp drop from 22% in last year’s survey.
This year direct company engagement became the primary ESG information source, cited by 25% of respondents.
Nearly half of managers, 44%, indicated that they often rely on internal ESG data rather than external sources, which was unchanged year-over-year, while 25% primarily rely on external data.
“Managers appear to primarily use these ESG sources and inputs as a tool for managing risk,” added Russell Investments. “When asked about the influence of ESG issues on decision making, reducing risk was cited 26% of the time, while driving positive returns and governance concerns were each selected by 19% of respondents.”
Kris Nelson, senior director, head of ESG investment management at Russell Investments, said that 2023 has seen the strengthening of reporting requirements in Europe, Canada, and Australia, as well as the rise of a more contentious debate in the United States.
For active managers, key challenges include the availability of data, the lack of standardised reporting for corporates, and meeting diverse client needs.
Access to consistent and reliable data and serving diverse clients’ needs were the top two hurdles that managers said they faced in pursuing ESG integration.
At the same time investors have faced the same challenges amid weaker economic and business performance.
“Nevertheless, the number of managers reporting that ESG considerations don’t affect their investment decisions has continued to fall, while commitments to responsible investing reporting frameworks and initiatives has continued to rise,” added Nelson. “Our research suggests that ESG has firmly established itself as a lasting force in the investment landscape.”
As a result, 75% of participants reported hiring additional dedicated ESG personnel, primarily to ESG or sustainability teams. In particular, there has been increased demand for ESG-specific compliance staff.
This year was Russell Investments ninth annual ESG Survey, which polled equity, fixed income, real assets, and private markets asset managers from around the globe.
The 169 respondents have nearly $20 trillion in assets under management, and nearly one third have AUM if more than $100 bn.
More than half or 56%, of respondents are headquartered in the U.S. with 15% of respondents based in the UK, and 10% based out of Australia or New Zealand.
© Markets Media Europe 2023
