Asset managers are ramping up ESG investments despite economic and political volatility, according to the Index Industry Association's ESG Global Asset Manager Survey released Tuesday.
The Index Industry Association, based in New York, represents the global index industry and its members administer more than 3 million indexes covering many asset classes, including equities, fixed income, commodities and foreign exchange.
The third annual survey of 300 Chief Financial Officers, CIOs and portfolio managers from the U.K., U.S., Germany and France also found that nearly half of them, 48%, expect developments like AI and machine learning to have the biggest impact on ESG measurement and reporting over the next two years, driven in part by the need for more cohesive and reliable data and analytics.
Another big change already being seen by asset managers is more ESG criteria for investing in commodities, where use of ESG criteria rose to 62% in 2023 up from 37% two years earlier. Survey respondents attributed that trend to a combination of ESG factors, reputational or regulatory risk and high energy prices.
For 81% of the managers surveyed overall, ESG in investment strategies became more or much more of a priority in the past 12 months, including for 88% of U.S. fund managers, and they expect it to account for half of portfolios within two or three years.
Fund managers increasingly consider more ESG issues beyond climate change and carbon emissions, with 42% focusing on natural resource usage or depletion, 39% on sustainable supply chains and 38% on resilience of physical assets to climate change as investing strategy priorities, the survey found.
Social factors also play a larger role in their approaches, with 62% of managers incorporating societal factors in all or most portfolios, including 74% of U.S. managers.
Other social issues gaining prominence for respondents are supply chains, safety and product quality, diversity and inclusion, and protection and privacy. For more than half of the fund managers, evaluating companies' social and governance performance and keeping up with changing views and expectations around ESG proved challenging.