Capital Group’s ESG Global Study 2022 has found that the Environmental in ESG is dominating the decisions of global investors.
The survey of 1,130 global institutional and wholesale investors found that ESG adoption is now widespread with the proportion of ESG users jumping to 89%, up from 84% in 2021. Europe has the highest percentage of ESG users (93%), while Asia-Pacific saw the largest increase in ESG users of any region over the past year (to 88% from 81% in 2021). It was also found that 63% of investors prefer using active funds to integrate ESG according.
The survey also found that more Europeans consider ESG to be central to their investment approach (31% vs. 26% globally), while investors in North America have the least conviction in ESG, with less than one in five reporting that ESG is central to their investment approach (18%). Globally, almost four in 10 (39%) agree that a lack of product innovation is, in part, holding back greater ESG adoption, and ESG integration remains the most used implementation strategy (59%) by investors.
Environmental focus is overshadowing the S in ESG globally
• Half (50%) of the investors surveyed say a fund’s ability to meet the United Nations’ Sustainable Development Goals (SDGs) is an important consideration when making fund selections.
• Almost two-thirds (64%) of them believe that helping companies transition to a green future is key to solving the climate crisis.
• The E of ESG continues to dominate allocation preferences with an increase of share from 44% in 2021 to 47% in 2022.
• However, 41% of investors expressed concern that social issues, the S of ESG, are being overlooked in favour of climate issues.
“ESG adoption rates appear to be firmly embedded among professional investors globally, with a growing preference for active managers to make the critical investment decisions,” said Jessica Ground, Global Head of ESG, Capital Group. “This preference underscores the complexity of assessing ESG issues and that reducing them to a single ESG score cannot capture nuanced company evaluations. Investors are hence turning to active managers that can focus on deep proprietary research, robust monitoring systems and engagement to analyse companies. At Capital Group, we understand our fiduciary responsibility to consider all material factors in assessing the merits of an investment. ESG issues are critical factors in companies’ long-term outlooks and are therefore critical to our investment research and analysis.”