Lack of consistent environmental, social and governance (ESG) data as well as the talent to manage ESG integration are among the ‘pull’ factors that inhibited effective ESG adoption, according to research from State Street Global Advisors (SSGA).
The research entitled Into the Mainstream: ESG at the Tipping Point identified key ‘push’ and ‘pull’ factors for ESG policy adoption across 300 institutional investors globally.
Top pull factors that inhibited ESG adoption included the lack of reliable and consistent ESG data, followed by resourcing or cost issues from internal integration, infrastructure, knowledge-building and a lack of available ESG talent to manage integration.
The main deterrent cited was the unreliability and inconsistency of ESG data, with 44% saying that data challenges was a primary concern, with pension funds being the most likely to cite this as a top concern with 47% having said so.
However, 69% of sovereign wealth funds viewed internal resource costs as a deterrent, which indicated partnership opportunities to collaborate with asset managers on ESG planning.
Top push factors that drove ESG adoption included a need to meet fiduciary duty and regulations, as well as ESG risk management for the portfolio, with each cited as top push factors by 46% of respondents.
Rakhi Kumar, head of ESG investments and asset stewardship at SSGA, said fiduciary duty was now a major driver of ESG, alongside regulation.
“That fiduciary duty was cited so highly marks a significant development since many investors previously struggled with whether ESG adoption runs contrary to their fiduciary objectives,” Kumar said.