Asset Holders Are Taking Kindly To ESG Strategies; Fees, Expenses Hinder Adoption - Data

Josh O'Neill

21 April 2017

Some 80 per cent of asset holders now have an environmental, social and governance component in their investment strategies, new data shows, but associated fees and expenses appear to often hinder ESG incorporation.

, surveyed 475 institutions from across the world.

The study found that 80 per cent of the respondents had an ESG component in their investment strategies, but nearly half (49 per cent) said that fees and expenses were the main barriers to further incorporating ESG into portfolios, followed by lack of internal knowledge.

Some 68 per cent of respondents said the integration of an ESG strategy had “significantly improved returns”, which, according to State Street, showed that the adoption of ESG-driven investment strategies had a future in portfolios.

“There's a collective shift in the investment world right now that has asset owners and managers thinking differently about the full implications of their investments,” said Chris McKnett, head of global ESG business at SSGA. “For the majority, the question is no longer: 'Should we consider ESG as part of our mandate?' The question is: 'How are we actively pursuing opportunities with our investments that help us reach our financial goals, while encouraging change in the process?'”

But ESG investing does appear to have its downsides.

More than half, or 56 per cent, said accurate assessment of external ESG asset managers was a “key issue”, and 57 per cent said it was difficult to benchmark performance against peers.

Still, a large majority of respondents (69 per cent) said that pursuing an ESG strategy had helped with managing volatility.

Some 84 per cent of respondents said they were satisfied or very satisfied with the financial performance of their ESG strategy.