ESG Investing Conference

ESG Investing

Data issues biggest barrier to greater ESG adoption, survey finds Corporate SecretaryData issues biggest barrier to greater ESG adoption, survey finds Corporate SecretaryData issues biggest barrier to greater ESG adoption, survey finds Corporate Secretary

Impact Investing Conference

Impact Investing Forum 2022

London. April 28-29, 2022.

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Nearly half (49%) of investors believe that a lack of solid ESG data is holding back their organization’s adoption of ESG. This is according to a new survey of over 1,000 investors across 16 nations.
Capital Group found that three quarters of respondents use active investment decisions to ensure ESG elements are integrated into their funds. More than two thirds (67%) say integration is their preferred ESG implementation method. However, investors are reserving their right to further integration because of concerns around ESG data.
Half (53%) of global investors consider a lack of consistency in ESG scores provided by rating firms a’stumbling block’ in incorporating research data into their investment decision-making process. Capital Group states that 25% of respondents (27%) rank difficulty accessing the information they need as their biggest challenge.
“One of the things I noticed was that the lack of reliable ESG data is right up with concerns about sacrificing investments returns as the biggest obstacle to ESG adoption,” Jessica Ground, Capital Group’s global head for ESG, said in a statement addressing the survey’s key findings.
Accessing ESG information is the main challenge in ESG implementation. Another obstacle is the lack of consistency in ESG scores. Investors are frustrated by inconsistent definitions of what is ‘good’ in ESG information.
They are asking for more consistency and accessibility. This concern about data highlights the importance of working alongside an asset manager with deep fundamental research capabilities that can look beyond data to assess the real situation.
Nearly half (49%) of investors respond to a question asking them what they would do to improve their organization’s focus and sustainability investing.
Researchers also examined the barriers to ESG adoption and asked investors how they could be overcome. For 43 percent, consistency in reporting is the key driver of better ESG analysis and implementation. This is followed by a greater cross-industry analysis (37%) of ESG factors within portfolios (34%) and a 34% appreciation for automated analysis tools like artificial intelligence.
Further research was conducted to determine how asset managers can best engage with companies regarding ESG. Regular corporate access came out as the most effective. Nearly half (46%) of respondents cite the importance to meet regularly with senior executives from companies they invest in. Another 45 percent cite exercising voting rights, monitoring and reporting to assess results (both 45%) as key engagement tools.
Ground also points out the preference for active management. Ground says that active funds are used by more than twice as many people who were surveyed to integrate ESG. This is in contrast to passive funds and trackers which only 25% of respondents used. ‘Investors should not be restricted to funds that screen out unethical sector, but want managers who can identify and manage ESG risk and opportunities through fundamental analysis and bottom-up security selection.

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