Half of investors globally say the lack of robust data is the biggest barrier to ESG adoption according to a new report by Capital Group.
Capital Group’s ESG Global Study 2021 surveyed 1,040 global institutional and wholesale investors, including pension funds, family offices and insurance companies, as well as fund of funds, retail/private banks and financial advisors, located across 16 different countries.
More than half of respondents globally (53%) said the lack of consistency in ESG scores from ratings firms is a stumbling block when incorporating research data into their investment decision-making process. More than a quarter (27%) ranked difficulties accessing the information they need as the leading challenge they face.
The global study found three-quarters (75%) of those surveyed use active investment decisions to ensure ESG factors are integrated into their funds and two-thirds of global investors (67%) said integration is the preferred ESG implementation strategy. Nearly half of those surveyed pointed to exercising voting rights and monitoring and reporting to assess outcomes (both 45%) as key engagement tools. Slightly more (46%) cited the importance of having regular meetings with senior executives at investee companies.
When asked what would enhance their organisations’ focus on sustainable investing, nearly half of investors (49%) highlighted the need for greater transparency and consistency in fund reporting frameworks. Looking at how these challenges can be overcome, about four in 10 investors globally (43%) said consistent reporting is the top driver for better ESG analysis and implementation. This is closely followed by greater cross-industry analysis of ESG factors in portfolios, and automated analysis tools such as artificial intelligence, which would be welcomed by more than a third of investors (37% and 34%, respectively).