Just under half (45 per cent) of asset managers, pension funds and insurers still do not have ESG investment policies in place, according to new research from Clearwater Analytics (CWAN).
The findings come just days after HSBC’s asset management division suspended its global head of responsible investment for stating that “climate change is not a risk we need to worry about”.
A poll of over 190 institutional investment firms representing more than USD12 trillion in assets under management (AUM) found that a third of those without a clear strategy point the finger at the lack of available and credible data to evaluate investments on an ESG basis, compared with just 16.5 per cent who blamed lower returns.
Market participants felt private equity and debt assets were behind the times from a data perspective, with four fifths reporting ESG market data for private equity investments to be either inadequate or lacking, and a staggering 79 per cent echoing this sentiment for private debt. This is in contrast to under half of respondents reported it as an issue when investing in public equities – with this disparity exposing the difficulty that investors have when attempting to measure the ESG impact of private market assets.
Respondents also felt that they were behind the times operationally when managing their ESG data – with over 40 per cent stating that they still use spreadsheets for reporting, despite half needing to report on responsible investing on a quarterly basis.
Commenting on the findings, Gayatri Raman, President of Europe and Asia at Clearwater Analytics, says: “The prevailing view of the last few years has been that ESG is a fundamental pillar of modern investing. This study shows that this isn’t strictly speaking true – and a major barrier is the lack of credible data, particularly in private markets. Before anyone can incorporate ESG factors into their investing strategies, data needs to be highly available, high quality, and easy to track. Only then will investors be able to fully integrate these initiatives into their investment process.”