ESG uptake by asset managers reaches 95%

Australian asset managers are catching up with Europe in their use of environmental, social and governance (ESG) investments at 95%, according to Russell Investments.

In a global study of 369 asset managers, 95% of those in Australia and New Zealand said they integrated ESG factors into their investment, only two percentage points behind the UK and Europe.

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“Australia and New Zealand have not slowed from improvements seen in last year’s study, trailing only the UK and Continental Europe in the percentage of managers integrating ESG into their investment practices. 95% of Australian and New Zealand managers surveyed said they now integrate ESG into their investment processes, a 2% jump from 2020, and 9% higher than in 2019,” it said.

“Continental Europe remained steady with 97% of managers integrating ESG into investment processes, whilst the US saw a 4% rise on last year’s figures to 82%.”

However, just 14% of managers in Australia and New Zealand said environmental concerns drove investment decisions for them. This was concerning as 87% of asset managers in the region said climate risk and broader environmental issues were the most frequent concerns raised by clients.

Looking globally, 90% of respondents said they included ESG in meeting with companies’ senior management and 82% explicitly incorporated qualitative or quantitative ESG factor assessments into their investment processes.

James Harwood, global equity portfolio manager at Russell Investments, said: “ESG integration within asset management investment and business practices in Australia and New Zealand continues to evolve quickly, as ESG concerns – particularly ‘E’ issues and climate risk – sit front and centre in the minds of local asset owners.

“More immediately, asset owners are demanding insight into how their assets will be managed in a net zero world.

“For savvy managers, it will pay to demonstrate to clients how de-carbonisation targets will impact the value of their assets, and the level of management required to transition their assets to this new reality.”