ESG Research Update

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Study looks at global ESG integration

A new Russell Investments global survey reveals that despite almost all fund managers having some form of ESG analysis, the influence of this research on real investments isn’t clear.

The Russell 2020 ESG study surveyed over 400 asset managers in most areas of the world, including Australia and New Zealand, and found that everyone recognised the importance of ESG integration.

Key findings include:

  • The researchers believe the industry is transitioning towards embracing ESG integration

  • Measuring the actual impact of investment decisions remains vague

  • When financial materiality of ESG-specific considerations is strong, investors take the research into consideration, but real instances of this happening turn out to be harder to find

  • ESG effort and portfolio performance links are weak, which may suggest that ESG criteria are not often a hefty driver in overall investment decision-making

  • Around 36 per cent of respondents said ESG factors never dominate investment decisions, which is down from 45 per cent last year

  • Managers who consider specific ESG factors as material influence apply those to investment decisions to manage risk (39 per cent) or increase returns (24 per cent)

  • Just two per cent said climate risk factors would play a major role in investment calls

  • Climate risk concerns in isolation have little power in most investment decisions

  • It is unclear how often ESG considerations impact investment decisions

  • Most managers don’t include ESG factors in investment performance attribution

  • Twenty-two per cent of respondents reported performance measures for managers/analysts with direct ties to ESG profile or climate risk criteria

  • ESG profile accountability is weak amongst key investment professionals, the report says, suggesting ESG impacts alone have less weight than the hype would indicate

  • There are significant ESG-related variations when it comes to how managers source and interpret data, undertake client reporting, with major differences between regions

The report states: “We continue to believe that ESG factors are a component of broader investment considerations, rather than viewed in isolation. Our research demonstrates that the investment community is seeking better information, deeper resources, broader consideration and clearer regulatory standards.

“However, the key question remains – ‘to what degree’? The goal is to achieve best-practice ESG integration. Agreement on how to reach that goal? The world is clearly not there yet.”

The study was conducted by Russel global fixed income investment research director Yoshie Philips.

– Investment News NZ