According to a global survey of more than 1,000 investors about their attitudes and approaches toward ESG published by Capital Group, over half of those surveyed believe that a lack of consistency in ESG scores from ratings firms is ‘a stumbling block’ when incorporating those scores into their investment decision-making process.
Key Survey Findings
Global asset manager Capital Group, recently published the results of their inaugural ESG Global Study 2021, by surveying 1,040 global institutional and wholesale investors, including pension funds, family offices and insurance companies, as well as funds of funds, retail/private banks and financial advisers. A few of the key findings from this study include:
ESG is Here to Stay: 75% of those surveyed disagree that ESG is a passing fad that will eventually go out of fashion. 76% disagree that investor interest in ESG will subside when the pandemic is over.
Investors Prefer Active Approach to ESG: Three-quarters (75%) of global investors prefer an active approach to integrate ESG into their investment process, more than double the proportions using passive funds and trackers (36%).
Integration vs Screening: Two-thirds (67%) of investors prefer a comprehensive integration of ESG factors across the investment research process compared to positive and negative screening (55%) or thematic investing (50%).
Inconsistency of ESG Scores: More than half (53%) of those surveyed felt that a lack of consistency in ESG scores from ratings firms is ‘a stumbling block’ to them incorporating this data into their investment decision-making process.
Lack of Robust Data: Almost half (49%) of the investors surveyed say that a lack of robust ESG data is ‘holding back’ their organization’s further adoption of ESG factors as part of their investment process. It is interesting that an equal number of investors expressed concern about sacrificing performance as a barrier to ESG adoption within their firms.
Greater Transparency in ESG Fund Reporting: Nearly half of investors (49%) highlight the need for greater transparency and consistency in fund reporting frameworks would most encourage their organizations to increase their ESG focus.
Increased Number of ESG Data Providers Used: Today, more than half (57%) of the investors surveyed say they use between 2 – 5 ESG data and research providers, compared to only 21% who used the same number of ESG providers 2-3 years ago.
Our Take
On the whole, most of the findings of Capital Group’s inaugural ESG Global Study were interesting, but not terribly surprising, as they were consistent with the results seen from other ESG related studies we have seen in the past year or two.
We were a little surprised by the fact that almost half of the investors surveyed (49%) continue to highlight concerns that the adoption of ESG factors into their investment process is likely to cost the funds in performance. The bulk of these concerns came from North America (55%) and Asia (51%).
The most important aspect of Capital Group’s Global ESG study is the fact that it establishes a baseline which future studies can be compared to – a critical step to be able to determine how asset managers’ attitudes and practices towards ESG change over time.