Sustainability risks internal audit

Lack of data hindering investor ESG take up

Investors have cited a lack of reliable data as their top obstacle to ESG adoption, a major survey reveals.

The survey, which comprised responses from 300 institutional investors globally, including private and public pension funds, endowments, foundations and official institutions, highlights the key push and pull factors for ESG adoption across the firms.

According to the poll, conducted by State Street Global Advisors, nearly half of investors (44%) put a lack of reliable or consistent ESG data at the top of their pull list.

The investors said single-sourced, confusing terminology was a major hinderance to accurately assessing the credentials of companies and their portfolio-level impact.

Internal resource constraints and cost implications (43%) came second on the pull list, closely followed by a lack of expertise to integrate ESG factors (40%).

However, the study revealed pension funds were most likely to cite the availability of reliable ESG data as their top concern at 47%.

Other pull factors lower down the list included concerns over maximising returns (38%), lack of regulatory pressure (30%), and a lack of interest in ESG from beneficiary members (21%).

On the flip side, investors identified fiduciary duty and regulation as the main drivers for ESG adoption at 46% each, followed by a need to mitigate ESG risks, which got 44% of the vote. 

“That fiduciary duty was cited so highly marks a significant development since many investors previously struggled with whether ESG adoption runs contrary to their fiduciary objectives,” Rakhi Kumar, head of ESG Investments and asset stewardship at State Street Global Advisors said.

Given the growing prominence of ESG as a significant portfolio consideration, an unsurprising 95% of those surveyed signalled their intention to hire more ESG specialists in the next three years. The remaining 5% percent intend to encourage their staff to become more familiar with the concept.

Last Updated: 23 November 2019
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