The survey, conducted from 4 October to 3 November 2022, had a sample size of 352 from professionals working in financial services across the globe, in roles related to ESG decision making. Respondents represented 329 institutions with cUSD10 trillion in assets under management.
Regulation: We have seen more scrutiny from regulators on ESG – first on corporate disclosures, then on funds and ESG ratings providers, and now on ESG indices. All this is changing behaviour, such as the approach taken by participants to ESG, the reporting of ESG, time spent on ESG and investments in the ESG ecosystem.
What surprised us: There is no guarantee that the sustainability strategy of a parent organisation or company has a bearing on the ESG strategy of a fund. Only two-fifths responded that parent companies drive fund strategies.
Understanding of ESG is growing: More respondents believe that investment professionals at their firms have a "solid understanding" of ESG issues. This has been creeping higher with each survey.
Intention to incorporate ESG: We are reaching an inflection point – where the level of future intention is falling below past intention. This is natural, in our view ‒ as the level of absolute ESG incorporation grows, there is less left (so to speak) to incorporate in the future.
ESG priorities: The focus on decarbonisation continues, but there is growing interest in water. There is now a clear winner amongst social issues: diversity and inclusion is going to be a focus area for a quarter of respondents in the coming year, while supply chains also appear to be moving into focus for investment professionals. Despite the uncertain environment, strategy and risk management is no longer the top governance issue. It has been replaced by corporate culture and leadership – the theme is back to "tone from the top" as per our first survey before the Russia-Ukraine war.
'Inflation and ESG': Three-fifths of the respondents believe rising costs are a hindrance to the sustainability strategies of businesses. This is understandable, given resources need to be diverted to deal with material sourcing and wages in the short term rather than focusing on long-term issues, such as sustainability.
How does a typical investment professional spend their time on ESG? On average, it is a fairly even mix between understanding specific issues, engagement, analysing companies and regulatory compliance. The balance of time is used for communicating with clients and internal education.