• The Index Industry Association (IIA) has released its third annual ESG Global Survey of Asset Managers, showing that ESG is becoming a priority for asset managers in the US, Germany, France and the UK.
• The survey reveals that asset managers are widening their focus on Environmental, Social and Governance factors and expanding their asset classes into commodities.
• Emerging technologies such as Artificial Intelligence, Blockchain, Internet of Things and Machine Learning are expected to help improve the timing, depth and predictive content of ESG data and metrics.
ESG Focus Widening
The Index Industry Association (IIA) has just released its third annual ESG Global Survey of Asset Managers . In partnership with Opinium Research, the IIA has taken the pulse of 300 CIOs, CFOs and portfolio managers from the UK, US, Germany and France. Assets under management for firms surveyed ranged from less than $1 billion to more than $1 trillion US dollars. Survey questions addressed a broad range of topics concerning the future of ESG investing such as general investment outlook, market issues, data sufficiency and challenges, policy impact, and emerging technologies.
The survey responses suggest that despite significant economic volatility and political frictions across all four countries surveyed (France Germany UK & US), ESG’s future role in global investment portfolios continues to increase. Eight in ten (81%) asset managers say ESG has become more (54%) or much more (28%) of a priority to their investment strategy over the past 12 months. This suggests that asset managers are broadening their view on Environmental factors; increasingly taking into account Social factors; as well as placing new emphasis on Governance factors when making investments decisions.
Asset Class Expansion
In addition to increasing importance placed on environmental social & governance considerations among investors – there is also continued growth in commodities being included as an asset class within portfolios overall driven by ESG focused funds & products. This could be attributed to commodity investors’ need for greater transparency & accountability when it comes to how these assets are managed – both at a corporate level & throughout supply chains – which have been exposed through recent events including climate change & human rights violations in many industries around the world. As such it is no surprise that this trend is continuing with almost half (48%) expecting commodity investments to exceed 10% within 3 years’ time – up from 40% last year & 33% two years ago respectively!
Emerging Technology Impacting Data Quality
The use of technology is seen by many investors as having potential implications for improving data quality when it comes to evaluating companies against environmental social & governance criteria – with technology such as artificial intelligence blockchain internet of things & machine learning expected to help improve upon traditional methods used historically when assessing these criteria at scale for large portfolios or indices etc.. With this in mind 86% expect AI/ML algorithms will be used extensively within 5 years – up from 82% last year & 74% two years ago respectively!
Policy Impact On Investment Strategies
As governments across Europe introduce new regulations aimed at improving sustainability standards – it appears investors are taking notice with almost three-quarters (72%) saying they expect some form of regulation or policy related impact on their investment strategies over next 12 months – up from 67% last year but still lower than 75% two years ago respectively!
Conclusion
The Index Industry Association’s third annual survey findings provide further evidence that Environmental Social & Governance considerations continue grow in importance within global investment portfolios with additional emphasis being put on data quality accuracy as well policy impacts which will likely shape strategies going forward over next few years…