Russell survey: emissions is top ESG metric

Russell Investments annual ESG Manager Survey has shown that carbon emissions data is currently the most highly reported ESG metric.

The survey of 236 asset managers shows that portfolio carbon intensity is largely underreported outside of listed equities and corporate bonds due to data limitations and non-standardised reporting frameworks. This makes it harder for investment firms to meet ESG regulations coming into force in 2023.

Carbon emissions data (87%) is currently the most highly reported ESG metric and carbon intensity is also being reported by most firms investing in listed corporate securities (Listed equity: 86%; Corporate bond – investment grade: 62%; Corporate bond – high yield: 57%). However, poor data availability or lack of standardised reporting means that less than 30% of firms allocating to other asset classes are able to report on carbon-related metrics of their respective portfolios.

Among fixed income firms, 41% of survey respondents said they have ESG-related data for developed market sovereign bonds, while only 27% have some form of carbon data in this segment. 20% of fixed income firms have some form of ESG data in the securitised bond market while only 8% of them have some form of carbon data in this segment.

“The results highlight further improvements are still needed around ESG data. In the corporate bonds space, there are still several challenges such as disclosure practices in privately held companies or applying carbon measures in green bonds. Outside corporate issuers, ESG-related reporting continues to evolve in an unstructured fashion due to the absence of clear industry standards. There are some proposed frameworks to account for sovereign issuers’ emissions which is a welcome development”, said Yoshie Phillips, Head of Fixed Income ESG Investing at Russell Investments. “We are seeing more support for standardised disclosures in key ESG metrics.”

Climate risk is the most prevalent ESG issue that investment firms hear about from clients for nearly half (45%) of the respondents, up from 39% in 2021. Climate risk is the dominant issue among respondents in Canada, the United Kingdom and Australia. In Europe, climate change combined with wider environmental issues top the list of investors’ concerns. 68% of managers globally identify climate change/environmental issues as their clients’ top ESG concern, up from 60% in 2021.