Over half of investors still consider environmental, social and governance factors as important for their portfolio asset allocation over the next 18 months, says Fidelity International, but a number of barriers to further adoption remain.
The ‘Professional Investor DNA Survey’ by Fidelity gathered the opinions of over 120 institutional investors and intermediary distributors across Europe and Asia on investor appetite for incorporating ESG considerations into portfolio allocations.
It found environment is the top consideration, with nearly two thirds (63%) of investors considering it as an important factor, with governance (58%) and social (51%) following suit. Decarbonisation and the energy transition, alongside the preservation of natural capital, ranked in the top three environmental themes, likely driven by ongoing investor and policy maker commitments to achieving net zero.
However, despite the appetite for ESG, the report found barriers still remain. Difficulty measuring impact is considered the biggest barrier to further adoption of sustainable investing, cited by 68% of respondents. Meanwhile, 52% of investors mentioned changes to or inconsistent regulations as a key barrier.
Jenn-Hui Tan, chief sustainability officer at Fidelity International, said: “Our study shows ESG remains firmly on investors’ minds. While ESG investing may now be viewed as a mainstream consideration in asset allocation, further progress is needed to break down implementation barriers. This includes difficulty measuring impact, with observations pointing to difficulties sourcing and analysing good quality company data, and navigating regulation, where discrepancies remain across national, European and global regulatory frameworks.
“We continue to support increased data transparency and standardisation, and the harmonisation of global regulatory regimes that enable decision-useful disclosure. We also champion for greater focus on policies driving real world outcomes, complementing the role of enhanced disclosures in guiding investor choice.”
Additionally, the report explored ways in which a positive impact can be achieved, with investors citing impact investing (59%), exclusionary screening (52%), individual company engagement (44%) and government policy and regulation (44%).
Tan added: “We believe the integration of sustainability into investment research and portfolio construction is important as it can impact long-term value creation and drive better client outcomes. As an active manager and steward of client capital we have a part to play in moving towards a more sustainable economy which better takes into account system-level risk but as the study highlights, there is no one way to achieve this. This is why we believe effective stewardship combines bottom-up, thematic, and system-wide approaches.”
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