Investors seek more tailored approaches to ESG

(London) – The push towards sustainable investment strategies continues to rise among asset managers, according to the latest Environmental, Social and Governance (ESG) survey by Aviva Investors’ Multi-Manager Research team.

The survey, which canvassed opinion from a broad mix of international firms, found 93 per cent of asset managers recognise growing appetite from their clients, while 80 per cent have observed a rise in requests for bespoke ESG solutions. The research also showed that over 70 per cent of respondents incorporate ESG factors into 75-100 per cent of their funds’ investment processes, up from just over 50 per cent in 2014.

Isabel Emo Capodilista, Head of Multi-Manager Research at Aviva Investors, said:

“ESG integration has become mainstream and, by itself, is no longer a differentiator. Our findings show investors want more tailored approaches as to how ESG can work best for them. Similarly, one-fifth of respondents undertake ESG stress tests to better understand risks that could impact investments and how to protect against them.”

In turn, the proportion of investment managers incorporating ESG considerations into fund manager and analyst remuneration has risen fourfold since 2014, to 42 per cent.

Isabel Emo Capodilista said:

“Good progress has been made in rewarding managers based on ESG criteria; however, almost one-third of respondents could not say with conviction that all their managers and funds take these considerations into account. Likewise, although 70 per cent of respondents believe ESG issues should be integrated into executive pay, just 26 per cent stated their own company does this. This is indicative of a struggle within the asset management industry to find consistency in its approach.”

In terms of approaches taken to ESG integration, 90 per cent of participants cited direct engagement with companies, while use of third party research (83 per cent) and rating holdings on ESG (70 per cent) were other common responses.

Isabel Emo Capodilista added:

“It is encouraging that over half of active managers who engage with companies believe it will improve performance, which suggests frameworks such as the Principles for Responsible Investment are driving positive change and establishing industry standards. That said, a contradiction still exists between belief and execution and there is room for greater uniformity across the industry.”

The survey identified several challenges around ESG integration, including availability and quality of data, low senior leadership buy-in, difficulty in measuring impact and understanding material ESG risks.

Isabel Emo Capodilista said:

“The industry faces challenges around consistency of language and definitions of ESG. Addressing these would reinforce confidence in the products and services investors receive. While greater company disclosures and a better understanding of quantifiable ESG factors has resulted in an uptick in the quality and accuracy of data from the investment industry, further improvements should facilitate the future growth and development of ESG strategies.”

-ENDS-

Notes to editors

The information and opinions contained in this document are for use by the financial press and media only. No reliance may be placed for any purpose on the information or opinions contained in this document nor should they be seen as advice. 

The press release is provided on the basis that Aviva Investors Global Services Limited is not causing the communication of a financial promotion under exemption of the Financial Promotion Order, as Aviva Investors Global Services Limited has no control over the way in which an article based on this press release is prepared and published by the financial press and media. 

Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (“Aviva Investors”) as at 15 April 2019. Unless stated otherwise any views, opinions expressed are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature.  The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested. 

Issued by Aviva Investors Global Services Limited, registered in England No. 1151805.  Registered Office: St Helen's, 1 Undershaft, London, EC3P 3DQ. Authorised and regulated by the Financial Conduct Authority.

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Aviva Investors is the global asset management business of Aviva plc. The business delivers investment management solutions, services and client-driven performance to clients worldwide. Aviva Investors operates in 14 countries in Asia Pacific, Europe, North America and the United Kingdom with assets under management of £331 billion as at 31 December 2018.

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