Wednesday 8 January 2020 5:31 pm

Nearly a third of investment managers not considering ESG factors

Nearly a third of investment managers are not committed to systematically considering environmental, social and governance (ESG) factors as part of their investment process across all asset classes.

According to pensions advisory firm LCP’s annual Responsible Investment survey, 30 per cent of managers are still failing in terms of such considerations.

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The report suggests that responsible investing can lead to better financial outcomes, with 85 per cent of managers saying they integrate ESG factors to improve long-term investment outcomes for their clients.

Despite increased focus from regulators and policymakers, actions taken to address climate-related risks remain weak.

Of five specific actions that can be taken to manage such risks, investment managers said they undertake, on average, just 1.7 per asset class.

In 14 per cent of cases, climate-related risks are not considered at all.

Claire Jones, principal and head of responsible investment at LCP, commented:

“The survey results around climate change considerations are particularly worrying, especially given the widespread pressure on institutions to respond to growing demands for a faster transition to a net zero carbon economy.

“The lack of clear engagement policies when it comes to responding to the challenges and expectations of modern society is also concerning.

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“Stewardship is a vital element of that response, enabling investment managers to help create long-term value for our clients and their beneficiaries, whilst simultaneously providing sustainable benefits for the economy, the environment and society.”

Overall, however, there are signs that progress is being made. Managers’ overall scores have improved from 2.3 to 2.6 (out of four) since 2018, and 88 per cent are now signed up to the UN’s Principles for Responsible Investment.