By Wai-Shin Chan, Head of Climate Change Centre and ESG Research – 19 July 2022
The survey, conducted between 7-30 June 2022, had a sample size of 340 from professionals working in financial services in global regions, in roles related to ESG decision making. Respondents represent 320 institutions with USD8 trillion in assets under management.
- What surprised us: The level of ESG incorporation actually fell over the past 12 months. Interest in biodiversity is still low, despite growing media attention. From a fixed income perspective, we were also surprised that using ESG labelled bonds was not a preferred approach. The build-out of ESG resources was more focused on process than people and data.
- Sustainability objectives: As global ESG fund regulations tighten, over 40% of respondents have sustainability as a primary or secondary fund objective. Respondents in Europe were much more likely to have such objectives than those in North America.
- Slightly lower intentions: The intention to incorporate ESG into investment decisions over the next 12 months fell to just over half, and the figure for the past 12 months also declined. Those with assets in Europe and North America were most likely to have lower intentions – perhaps due to geopolitics.
- Incorporating ESG: The level of ESG that is incorporated into investment decision making fell slightly – a trend that was noticeable across all regions, asset classes and assets under management.
- Which ESG issues matter most: A new option of ‘strategy and risk management’ was the top governance issue – we think this is important during times of uncertainty. Climate change remains the top environmental issue for respondents over the next 12 months.
- War and the energy transition: Respondents broadly believe that the transition will be slower in the short term, but faster in the medium and long term. Those operating in North America were most negative on the speed of the energy transition. Most respondents would invest in renewables in the next 12 months, except North America where it was oil & gas. Of those who selected renewables, solar was the preferred technology by far.
- ESG strategy: There was no change in the approach to ESG, with ‘Integration’ remaining the top choice.
- Corporate perceptions: European corporates are perceived to be the most strategic when it comes to sustainability. Public perception was still the most important reason why companies embrace sustainability.
- ESG drivers: 40% of respondents believed that businesses (through disclosure and actions) had the most responsibility to drive sustainability, moving clear of regulators, which fell to around a third.
- ESG standards: The belief that corporate sustainability reports were ‘true and accurate’ fell somewhat. Over half of respondents think there should be a particular standard that corporate ESG disclosures should follow – this sentiment was strongest in Europe.
- Fixed income: The preferred ESG approaches were integration, negative screening and external ratings. We were surprised that using labelled bonds was not a preferred approach.
- ESG infrastructure: The focus of respondents is on their overall ESG process (i.e. internal frameworks and methodology) as opposed to investing in more people or more data. We find it encouraging as we believe the development of a proper ESG process is critical.
First published 18th July 2022.
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