Asset managers need better corporate data and metrics to offer better ESG investment products, according to a survey released Monday by the Index Industry Association.
The independent, non-profit organization representing the global index industry surveyed 300 CFOs, CIOs and portfolio managers in asset management firms in four markets – U.S., U.K., France and Germany – in mid-March.
The survey report, "Measurable Impact: Asset Managers on the Challenges and Opportunities of ESG Investment," found that 85% of the fund management firms consider ESG a high priority overall, and even more, 94%, among U.S. fund managers.
The managers surveyed said they expect ESG to become even more important in the future, rising to 26.7% of ESG assets in their portfolios within a year and 43.6% within five years.
Among respondents, 40% said they use indexes for measurement and benchmarking, and 39% use it as the basis for their investment portfolios, while 56% of funds with ESG as part of core activities reported using indexes.
One of the main challenges identified by respondents is the lack of reliable corporate data about the ESG activities of the companies they hold, with 63% of managers considering it a major or moderate challenge to ESG implementation, and 64% concerned about a lack of transparency or insufficient corporate disclosure about a company's ESG activities.
Evaluating ESG performance is another area for improvement, with 61% of respondents considering a lack of meaningful metrics as a major or moderate challenge, and 58% worried about a lack of data standardization among a proliferation of ESG reporting organizations and conventions worldwide.
Most respondents, 88%, would also like to see more ESG asset class options beyond equities, which attracted about 90% of sustainable funds in the U.S. in 2020 and 68% in Europe, compared to 18% for fixed income.
"The survey highlights that, while there is growing global demand for ESG investment products, a lack of corporate data reporting standardization and the complex array of ESG reporting organizations leaves ESG investors wanting more clarity about the available investment products," IIA CEO Rick Redding said in the release.
