ESG adoption barriers become ‘less pronounced’

10 October 2023
| By Jasmine Siljic |
image
image
expand image

A new report from Capital Group has observed broad industry progress in overcoming challenges that previously deterred investors from adopting ESG strategies.

The asset management firm’s ESG Global Study, which surveyed 1,130 professional investors in 25 countries, explores the attitudes towards and adoption of ESG investment. 

Capital Group found that while investors are continuing to grapple with obstacles such as data, regulation, disclosures and performance, these persistent problems have become less pronounced today than two years ago.

The quality of ESG data remains the most significant concern, with 54 per cent of global investors stating that consistency and reliability of data is still a very challenging issue for their ESG adoption. However, this was down from 62 per cent two years ago.

Less than half (46 per cent) of investors surveyed have concerns about how ESG could impact investment performance, compared to more than half (54 per cent) two years ago. 

The number of investors, which describe the complex regulatory landscape as very challenging, is slowly decreasing, from 50 per cent two years ago to 47 per cent today. 

With a lack of industry-wide definitions of ESG, 39 per cent of institutional investors have formed their own ESG definitions to ensure consistency across teams. Additionally, more than a third have created their own in-house approach to categorising ESG funds.

“It is encouraging to see signs that some longstanding barriers to ESG adoption, like data and definitions, are starting to diminish as the more investors know about ESG, the more they are finding proactive ways of dealing with its challenges,” said Jessica Ground, global head of ESG at Capital Group.

While these obstacles have become more achievable to investors, concerns surrounding greenwashing have grown.

Nearly 60 per cent see it as a grave challenge today, a much higher proportion of the 39 per cent which saw it as an obstacle two years ago. 

However, the study noted: “The rise in greenwashing concerns does not necessarily mean the problem is getting worse. It may reflect the heightened visibility of the issue amid increasing regulatory scrutiny and media reporting.”

The Responsible Investment Association of Australasia (RIAA) recently revealed that the threat of greenwashing is deterring over half (62 per cent) of investors, up from less than a quarter (23 per cent) in the previous year. 

More broadly, Capital Group saw global ESG adoption grow to 90 per cent, largely driven by the 57 per cent of global respondents who think incorporating ESG analysis can uncover attractive investment opportunities. 

Equities remain the most popular asset class for implementing ESG at 81 per cent, followed by fixed income at 58 per cent, and alternatives at 44 per cent.
 

Read more about:

AUTHOR

Add new comment

The content of this field is kept private and will not be shown publicly.
 

Recommended for you

 

MARKET INSIGHTS

sub-bg sidebar subscription

Never miss the latest news and developments in wealth management industry

Squeaky'21

My view is that after 2026 there will be quite a bit less than 10,000 'advisers' (investment advisers) and less than 100...

1 week ago
Jason Warlond

Dugald makes a great point that not everyone's definition of green is the same and gives a good example. Funds have bee...

1 week ago
Jasmin Jakupovic

How did they get the AFSL in the first place? Given the green light by ASIC. This is terrible example of ASIC's incompet...

1 week 1 day ago

AustralianSuper and Australian Retirement Trust have posted the financial results for the 2022–23 financial year for their combined 5.3 million members....

9 months 1 week ago

A $34 billion fund has come out on top with a 13.3 per cent return in the last 12 months, beating out mega funds like Australian Retirement Trust and Aware Super. ...

9 months ago

The verdict in the class action case against AMP Financial Planning has been delivered in the Federal Court by Justice Moshinsky....

9 months 2 weeks ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND