Institutional investors can't fill all of the need that has been created through the efforts of the global community to introduce sustainability and climate change considerations into investment strategies because the right products and practices are not yet there, delegates heard at the World Pensions Council's annual conference in Paris on Thursday.
Speakers on several panels agreed that the lack of adequate data is preventing asset owners from delivering in full the objectives of COP 21 climate goals agreed in Paris in 2015. Panelists said many challenges relate to the standardization of the data in the market.
Roelof van der Struik, investment manager for treasury trading and commodities at PGGM, the manager of the €185 billion ($227.3 billion) Pensioenfonds Zorg en Welzijn, Zeist, Netherlands, said "it takes resources, efforts and guts to do (ESG investing) properly."
"At PGGM we vote on every single share we own, and we realized that it cost us €1 million to do research that backs the votes," he said. But despite the cost, thanks to ESG analysis of the stocks, "we are now able to secure the return of €1.5 million in place of the cost because of the voting,"
One French pension fund executive who declined to have his name used whose plan recently divested all of its exposure to tobacco said, "past (data) is not a good indicator of the return," adding that despite the divestment, the return achieved was still reasonable.
Money managers present at the conference agreed. "Investors still don't know what do with ESG integration and we are looking for solutions that are not scary to them so that they don't have to sacrifice returns," said Meryam Omi, head of sustainability and responsible investment strategy at Legal and General Investment Management, on a panel discussion.
And European regulators are working together to help asset owners with the data. The European Investment Bank is working on the standardization of assets in green finance following a meeting with the European Commission's working group earlier this month, said Bertrand de Mazieres, director general of finance at EIB, during a separate panel.
"There is no clarity (as to the asset classes) in green finance as there is no scientific consensus as to what is considered green finance," he said.
The EIB requires investors to be accountable for regular reporting and especially impact reporting in efforts to boost the impact of deployment of assets in the real economy a standardization is required, he added.
The EU intends to deploy €70 trillion of assets until 2040 in order to implement COP 21 provisions.