Almost two-thirds of UK-based asset managers believe a lack of international regulatory consistency is creating either a “significant” or “very significant” challenge for environment, social and governance (ESG) investors, according to a new survey by PwC – ‘Embracing ESG Transformation’.
The report which surveyed 16 UK-based asset managers of varying sizes, focused on how they are “leveraging regulation to drive value creation,”
The report found that around 76% see regulation as a significant, or very significant, driver of their focus on ESG, and of ensuring their approach to ESG goes well beyond the greenwashing concerns that regulators – such as the Financial Conduct Authority and the Securities and Exchange Commission – have highlighted recently.
There have been a plethora of global initiatives progressing in different ways regionally and nationally. The European Union is seen ahead of the curve with its Taxonomy, Non-Financial Reporting Directive (NFDR) and Sustainable Finance Disclosure Regulation (SFDR).
Roughly 69% of those surveyed have already implanted the SFDR while 63% are incorporating the EU’s taxonomy regulation.
However, just 44% believe they have included disclosures within their public reporting that are in-line with the Task Force on Climate-Related Financial Disclosures (TCFD), while only 23% have had ‘some’ or even ‘minimal’ engagement with the FCA’s Diversity & Inclusion agenda.
In general, less than half or 46% are conducting any form of quality assurance work on their ESG data, while only 13% said that they are fully prepared for the EU Taxonomy Regulation. Meanwhile, 25% of those surveyed said that they are fully prepared for SFDR.
“Overall, asset managers are taking the regulatory aspects of ESG very seriously. But they must be careful to ensure work does not fall through the gaps,” the report stated. “The limited implementation work done on EU Taxonomy Regulation versus SFDR, for example, is a concern given the close links between the two.”
Although regulatory pressure is an impetus, three quarters said investor demand has led to an increase in promoting their firm’s focus on ESG, while 25% cited the upcoming COP26 summit in November as a ‘significant’ driver behind their recent ESG push.
Overall, PwC’s survey found 82% already have an ESG programme in place, and that from next year, 77% will stop buying non-ESG products altogether.
Aside from the navigating the fragmented regulatory landscape, data quality and skills shortages were also seen as major obstacles.
©Markets Media Europe 2021
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