Around half of investors (53%) globally said that a lack of consistency within ESG scores was holding them back from integrating ESG data into their investment-decision process, a study by Capital Group has revealed.
The study, which surveyed 1,040 global institutional and wholesale investors, found 27% also ranked difficulties accessing the information they need as the leading challenge they face.
When asked what would enhance their organisations’ focus on sustainable investing, 49% highlighted the need for greater transparency and consistency in fund reporting frameworks.
More than four in 10 (43%) said consistent reporting is the top driver for better ESG analysis and implementation, while 37% cited greater cross-industry analysis of ESG factors in portfolios. Meanwhile, a third (34%) said automated analysis tools such as artificial intelligence would be a welcome development.
Jessica Ground, global head of ESG at Capital Group, says: “ESG is an increasing area of focus for institutional and wholesale investors globally. While investors appreciate the importance of ESG integration – and qualitative analysis and engagement by active fund managers – they also report that the lack of robust and consistent data is the main challenge when investing in ESG.
“It’s understandable that as ESG becomes more important to these investors, the desire to be rigorous in their assessment of ESG grows.”
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 (67%) said integration is the preferred ESG implementation strategy.
When discussing how asset managers can most effectively engage investee companies on ESG, nearly half (45%) of those surveyed pointed to exercising voting rights and monitoring and reporting to assess outcomes as key engagement tools. A similar proportion (46%) cited the importance of having regular meetings with senior executives at investee companies.
