Sharp increase in ESG integration expected

One-in-five Australian investors believe environmental, social, and governance (ESG) will become a necessity to almost everything they do in two years’ time, according to a BNP Paribas survey.

BNP Paribas conducted a global survey of 356 asset owners and managers with an estimated $15.4 trillion in assets under management about their attitudes to ESG compared to two years ago and found an increased sophistication in ESG implementation.

Globally, four-in-10 survey participants said ESG would become integral to their investment process in the next two years, compared to only 8% in 2019.

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Head of investment solutions at BNP Paribas Securities Services Asia Pacific, Nadim Jouhid, said investors were changing focus from relying on negative screening to wider ESG integration into their investment process and risk management decisions.

But the survey also showed 68% of Australian investors were concerned about conflicting ESG ratings or indices, in line with the global average.

The survey showed 38% of APAC participants were exploring net zero investment options and 21% had a company-wide commitment, which put APEC on the forefront of carbon neutrality ambitions compared to the global average.

Australia was slightly behind APAC in signing up to net zero ambitions by 2050, but 40% of those who had signed up wanted to achieve net zero 20 years earlier than expected.  

China and Singapore cited reputation as the strongest driver of ESG integration, making up 91% and 76% of their respective lists.

However, in Australia, external stakeholder requirements led with 68% of investors while reputation ranked fourth.

When asset classes were broken down, investors in Australia showed a stronger propensity to use ESG within real estate with retail making up more than half of ESG assets compared to the global average of 35%.

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