Climate risk the most dominant ESG concern among investors
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Climate has been identified as the greatest environmental, social and governance-related concern among asset managers’ clients, according to a survey.
While responses varied by region and asset class, Russell Investments, which conducted the 2023 Manager ESG Survey, said apprehensions surrounding climate risks and environmental issues dominated across the board.
The findings were aligned with the 2022 survey results, said Russell Investments.
In Europe, the Middle East and Africa, climate risk captured more than 80% of the responses. A similar proportion of participants in Asia Pacific also placed the risk as their top ESG concern.
Clients' top ESG concerns - as reported by managers Source: Russell Investments
Kris Tomasovic Nelson, senior director, head of ESG investment management at Russell Investments, said: “Climate risk is at the forefront of investors’ concerns, and we expect ESG to become further rooted in the investment landscape.”
Social issues continued to receive lower emphasis, said the firm, with only a handful of managers in the UK, the US and Canada reporting social issues in general as a top concern from clients. Diversity was reported as the key issue by a few managers in the US and the UK.
Data still a major challenge to integrating ESG information
When asked pinpoint the most significant obstacle to incorporating ESG information, several managers selected “other”, articulating concerns specifically related to data.
“They emphasised the hurdles posed by inadequate disclosures and insufficient standardisation of disclosure frameworks for companies, data providers, and rating agencies,” said Russell Investments.
Challenges to ESG integration by region Source: Russell Investments
This is not the first time data providers have been blamed for concerns around the quality of data. Last year, Morningstar Sustainalytics argued that regulation for ESG data and rating providers should be principles-based to avoid obstructing innovation, while asset manager Insight Investment said a more prescriptive approach would benefit the market.
The survey also found many managers flagged the difficulty of serving diverse client interests when assimilating ESG-related information into investment decision making - an answer reflected by respondents from all regions.
Russell Investments also noted that only managers in the US cited negative performance repercussions as a challenge, “possibly mirroring the country’s ongoing political debates around financial materiality”.
The survey covers responses from 169 asset managers globally.
