A majority of asset managers and asset owners are beginning to align their investments with the United Nations’ Sustainable Development Goals, according to a survey by BNP Paribas Securities Services.
The survey of 347 institutional investors – 178 asset managers and 169 asset owners – shows a growing commitment to ESG investments, with 75 percent of asset owners and 62 percent of asset managers holding 25 percent or more of their investments in funds incorporating ESG criteria compared with 48 percent and 53 percent, respectively, in the previous survey in 2017.
This trend looks set to continue, with 90 percent of investors interviewed by the French firm saying more than 25 percent of their funds will be allocated to ESG investments by 2021.
According to the respondents, ESG data remains the biggest barrier to incorporating more ESG factors into the investment process – as was the case in 2017. Other barriers cited include costs associated with ESG integration, a lack of advanced analytical skills and the risk of managers falsely stating their investment is green. One third of all respondents also say technology costs are a barrier to ESG integration – up from 16 percent in 2017.
Sixty-six percent of respondents say data is the main challenge when addressing ESG investments, while 32 percent think technology is a key challenge and 30 percent cite the risk of not having the necessary analytical skills.
Only 2 percent of respondents rank improved long-term returns in their top three reasons for ESG investment, though 60 percent of all respondents expect their ESG portfolios to outperform over the next five years.
‘ESG investment is becoming increasingly important for investors, and our survey highlights their appetite to pursue both purpose and performance,’ says Florence Fontan, head of asset owners at BNP Paribas Securities Services, in a statement.
‘But practical integration has its challenges due to data and technology barriers, and deep ESG investment is still finding its feet. The next two years will be critical to achieving the right investment mix, technology and skills.’