Analysis from the CFA Institute finds that regulation in EU and Canada has helped alleviate potential confusion for investors, but greater harmonisation of terms across jurisdictions is needed to accelerate progress.
Tabula research finds majority of investors believes ESG crucial in fixed income decisions
New research from European ETF provider Tabula Investment Management (“Tabula”), surveying 100 European institutional investors and wealth managers with combined assets under management of over EUR150 billion, found that 98 per cent say that ESG data is important to informing their fixed income investment decision-making with two thirds emphasising that it is very important (please see the attached press release).
The research reveals that the majority of investors and wealth managers surveyed use more than one ESG data provider. Just over half said they use two providers; 11 per cent use three; 2 per cent use four.
When asked to rank what drives the decision to use ESG data providers to support fixed income investment decisions, respondents rated quality of rating methodologies as most important; ease of use (reporting, platforms) was second; geographical coverage third; and issuer coverage fourth.
In terms of the types of ESG data investors and wealth managers source from third-party providers:
58 per cent cited Sustainable Finance Disclosure Requirements, principal adverse impact and other regulatory reporting requirements information.
More than half (55 per cent) ask for ESG ratings while half of those surveyed seek raw corporate data disclosed by issuers such as emissions data and gender pay gap figures.
Forty-six percent say they look at business involvement screens, while 38 per cent analyse data on climate risk and temperature scores.
More than a third (36 per cent) seek data on alignment with the Sustainable Development Goals and the same number source information on impact ratings.
Almost all those surveyed say that differences between providers’ ESG ratings for the same issuer make using that data a challenge. One-quarter say inconsistencies make it very challenging to use the data while 69 per cent say it is quite challenging. Only 6 per cent say that discrepancies between ESG ratings for the same issuer do not make ESG data use a challenge for fixed income investment decision making.
Pantheon Infrastructure PLC, the listed global infrastructure fund, has committed to invest approximately GBP35 million in battery storage and electric vehicle fleet specialist Zenobe, through a co-investment vehicle managed by Infracapital, a leading European infrastructure investor that has raised and managed over GBP7 billion in assets.
Investment manager First Sentier Investors has launched a nature and biodiversity guide for institutional investors to identify, assess materiality and responses to nature and biodiversity risks in portfolio companies.
A BNP Paribas survey of 420 asset owners and managers, hedge funds and private equity firms shows that institutional investors are mobilising capital towards investments that will deliver measurable positive impacts alongside financial returns. Despite data constraints posing the biggest barrier to ESG integration, especially in tackling financial risks posed by climate change, institutional investors are nevertheless incorporating ESG, notably in their portfolio management and investment decisions.
The EFAMA Secretariat writes that the European Commission has taken a significant stride with its newly unveiled proposal on Environmental, Social, and Governance (ESG) rating activities, which aims to provide a more comprehensive understanding of ESG ratings methodologies, data sources, and potential biases, ultimately empowering investors to make informed decisions.
Morningstar Indexes has conducted a survey of significant asset owners, with Thomas Kuh, Head of ESG Strategy for Morningstar Indexes, commenting on the investment insights that can be drawn from the findings. The survey revealed that the ongoing political campaign in the US to ‘cancel’ ESG investment approaches is among the issues on the minds of asset owners.
PwC Luxembourg has released the fourth edition of the ESG Mutual Funds Poster showcasing ESG growth trends for the 2022 calendar year.
According to Morningstar Equity’s research report, investors need to approach the clean energy transition with a risk/reward mentality. Morningstar’s Clean Energy Transition report focuses on electricity supply and demand in the United States and examines the oil and gas industry, the rise of electric vehicles, and lithium demand growth. The report also offers Morningstar’s top picks from the utilities, energy, and basic materials sectors for investors.
Gathering robust, reliable and timely data to inform ESG investment decisions remains a persistent problem for asset managers and their investors.
