About half of institutional investors point to a lack of robust data as a barrier for further adoption of environmental, social and governance, according to Capital Group’s Inaugural ESG Global Study 2021.
The report canvassed 1,040 global institutional and wholesale investors, including pension funds, family offices and insurance companies, as well as fund of funds, retail/private banks and financial advisors, across 16 different countries.
The study sought to identify the key drivers behind how these professional investors are integrating ESG into their operating models and where the challenges lie.
More than half of respondents globally (53%) said discrepancies in ESG scores from ratings firms is a major obstacle when incorporating research data into their investment decision-making process.
“One of the things that struck me is that the lack of robust ESG data is right up there with concerns about sacrificing investment returns as the biggest barrier to ESG adoption,’ says Jessica Ground, Capital Group’s global head of ESG, in a statement commenting on the key findings.
She adds, ‘Accessing ESG information and data is identified as the primary challenge of ESG implementation. A lack of consistency in ESG scores is also a stumbling block. While there is more ESG information available than ever before, investors are frustrated by conflicting definitions of what is considered ‘good’ in the ESG space.
She notes, ‘They are calling for greater consistency and accessibility. This concern around data also underlines the importance of working with an asset manager that has deep fundamental research capabilities and that can look beyond the data and assess what’s really going on.’
When asked what would enhance their organisations’ focus on sustainable investing, nearly half of respondents highlighted the need for greater transparency and consistency in fund reporting frameworks.
In terms of overcoming these challenges, about four in 10 said reliable reporting is the top driver for better ESG analysis and implementation.
This was closely followed by greater cross-industry analysis of ESG factors in portfolios, and automated analysis tools such as artificial intelligence, which would be welcomed by more than a third of investors – 37% and 34% respectively.
©Markets Media Europe 2021
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