Institutional asset owners are making significant ESG allocations and planning to do even more, according to a CFA Society New York survey conducted at the recent ESG and Climate Asset Owner Summit.
More than 200 asset owners, including pension funds, sovereign wealth funds, insurance companies, family offices, endowments and development finance institutions with more than $15 trillion in combined assets attended the gathering in late September.
Of the 89 asset owners surveyed during the summit, 45% reported that ESG is fully or significantly integrated across their portfolios, and 39% plan to more formally integrate ESG into their investment processes.
One of the biggest issues highlighted in the survey and at the summit was the lack of quality data. It represents the biggest challenge for 51% of those surveyed, followed by skepticism over the viability of ESG, political or regulatory uncertainty, confusion over industry terminology and lack of quality fund managers.
"Too many asset owners say they are waiting for standardized data or more academic proof. But in investing, as in many industries, if you wait until a theory is fully proven it's already too late," said Hiro Mizuno, executive managing director and CIO of Japan's ¥159.2 trillion ($1.47 trillion) Government Pension Investment Fund, Tokyo.
"It's time for the investment community to accept its social responsibility, which means working to minimize, mitigate, and reverse any negative externalities caused by our investments" and at least start integrating ESG data into their investment process immediately, Mr. Mizuno said in his keynote speech.
The survey also found an emerging consensus on ESG metrics, although 33% of asset owners use internally developed ESG metrics to build and monitor their portfolios. When deciding ESG allocations, 59% of asset owners cited "evidence of the materiality of ESG issues" (35%) and "opportunities to generate alpha" (24%) as their biggest motivators, while 38% cited growing investor or beneficiary demand.
Robert Rowan, director of the CFA Society New York's Asset Owner Series, expects further growth as ESG is fully integrated into portfolios and the market meets demands for products. The survey "supports our members' view that the asset owners are going to be the drivers," Mr. Rowan said in an interview.