Environmental, social and governance (ESG) integration has seen a “staggering upsurge in commitment” from institutional investors over the last couple of years, according to a new global survey commissioned by the Paris-headquartered BNP Paribas.
The BNP Paribas study of over 356 institutional investors, including two in NZ, found almost a quarter (22 per cent) integrated ESG factors into “all or most of their portfolio”.
“In 2019, not one respondent said their organisation incorporated ESG into all of their investments,” the report says.
“… However, despite these positive signals, there remains considerable areas for development. A significant portion of respondents still incorporate ESG into less than half of their portfolio.”
As well as the faster-than-expected uptake of ESG, the survey – carried out by research firm CoreData – found that despite regional differences (with Asia-Pacific leading the way) the trend has been spurred on globally by reputation-based incentives, the drive to ‘net zero’ and a new regulatory impetus.
But the survey, third in a series starting in 2017, found concerns around data as the major impediment to broader adoption of ESG among institutional investors.
“Data remains the primary barrier to integration. 59% of 2021 survey respondents cite issues related to data as a top impediment, i.e. among their top two challenges to integration,” the report says. “This compares with 66% in 2019.
“… Although, here too there is room for optimism, as asset managers and owners look to mitigate these issues through a multi-layered approach to ESG data analysis, and increase their engagement with investee companies.”
Nadim Jouhid, BNP Paribas Securities Services APAC head of investment solutions, said the mood among institutional investors had shifted from concerns about the availability of ESG information to more nuanced concerns around data quality and consistency.
“The amplified data challenge means creating additional complexity within your organisation and you’ll probably need to invest into new technology,” Jouhid said in a release. “What we’ve asked our participants is where they orient those investments into technology, and integration and aggregation of different data sources in their organisation is a priority – even beyond the capability of doing internal reporting on it. Having multiple data sources is great, but it opens up a whole new can of worms where companies need to invest into a solution.”
In keeping with the ESG theme, last week the French institution’s funds management arm – BNP Asset Management (BNPAM) – rolled out three new sustainability-focused products to the Australian and NZ market, namely the: Green Bond Trust; Earth Trust; and, China Equity Trust.
David Grybas, BNPAM Australia chief, said in a statement: “The demand for quality sustainable, ethical and impact investment products has continued to grow in Australia and New Zealand.
“… The launch of these additional capabilities will allow an even broader range of investors to benefit from BNP Paribas Asset Management’s significant expertise in the sustainable investment space.”