More than 65% of money managers and asset owners align their investment framework with the United Nations' Sustainable Development Goals, according to a survey by BNP Paribas Securities Services.
The survey of 347 institutional investors — 178 money managers and 169 asset owners — showed stronger commitment to environmental, social and governance investments, with 75% of asset owners and 62% of money managers holding 25% or more of their investments in funds incorporating ESG vs. 48% and 53%, respectively, in the previous survey in 2017.
Ninety percent of the investors interviewed by the French asset servicing firm predicted more than 25% of their funds will be allocated towards ESG by 2021.
According to the respondents, of which 110 were based in Asia, 129 were located in Europe and 108 in North America, ESG data remains the biggest barrier to incorporating more ESG factors to investment process, as was the case in 2017, Other barriers were costs associated with ESG integration, a lack of advanced analytical skills and risks of managers falsely stating their investment is green.
One-third of all respondents cited technology costs as a barrier to ESG integration, up from 16% in 2017.
Some 66% of respondents said data was the main challenge, while 32% thought technology was a key challenge, 30% said the risk of not having analytical skills and 21% the risk of greenwashing.
Ninety percent of all respondents had less than £25 billion ($32 billion) in assets under management.
Some 2%of respondents ranked improved long-term returns in their top three reasons for ESG investment, although 60% of all respondents expect their ESG portfolios to outperform over the next five years, BNP Paribas said.
"ESG investment is becoming increasingly important for investors, and our survey highlights investors' appetite to pursue both purpose and performance," Florence Fontan, head of asset owners at BNP Paribas Securities Services, said in a news release. "However, practical integration has its challenges due to data and technology barriers, and deep ESG investment is still finding its feet. The next two years will be critical to achieving the right investment mix, technology and skills in place."