There has never been a better time to invest based on environmental, social and governance principles. Institutional asset owners are benefiting from a menu of ESG strategies, products and capabilities that is bigger than ever before. Innovation by asset managers and increased regulatory pressure is driving ESG investing forward.
Most asset owners, 85%, believe that ESG factors are material to investment policy, while 70% say ESG factors have become more material in the last five years, according to the Voice of the Asset Owner survey from Morningstar Indexes and Sustainalytics this year. Yet the survey also revealed that ESG implementation remains a slow process: Only 29% of asset owners said they use ESG factors for more than half their total portfolio.
Innovation in ESG Investing Webinar
Challenges in data standardization remain, but asset managers have moved forward with proprietary tools to harness increasing amounts of ESG data and with improved clarity around their ESG strategies.
Co-Head, Sustainable Investing
Aegon Asset Management
Annie Chor Joyce
Managing Director, Head of ESG
Kirk Moore, CFA
Global Head of Research
Columbia Threadneedle Investments
Gareth Shepherd, PhD, CFA
Co-Head Voya Machine Intelligence, Portfolio Manager
Voya Investment Management
Wednesday, November 30, 2022
2:00 p.m. ET
The biggest concern of asset owners continues to be the bottom line, said Christopher McKnett, co-head of sustainable investing at Allspring Global Investments. “It’s always about performance. From our perspective, given some of the equity market rotation that we’ve seen over the last 12 to 18 months, with value doing better than growth and the strong performance of energy, investors want to know how that affects performance today and what it means for the future,” he said.
But investing for ESG and the energy transition from fossil fuels to a net-zero economy isn’t an and/or proposition, McKnett added, referring to the United Nations-led goal of moving to eliminate greenhouse gas emissions. “We think it’s an ‘and,’ not an ‘or,’ because solving for energy security can often take you toward a more diversified energy mix and, ultimately, away from more potentially volatile fossil fuels.”
Asset owners’ concerns with ESG adoption aren’t limited to performance, though. McKnett pointed to what he calls the authenticity issue. “Our institutional clients are doing deeper diligence on [asset managers] than they ever have before,” he noted. “When I started in the asset management business years ago, it was ‘Tell me what you do.’ Now it’s ‘Tell me and show me, and back it up with examples A, B …….