ESG: Social seen as most difficult to analyze

Improved long-term returns and risk mitigation are the key motivators behind ESG integration, with social seen as the most difficult element to analyze and integrate, according to a series of snap polls held at the recent Truvalue Labs ESG Investing Forum.

Almost two thirds (72 percent) of respondents say social is the most difficult to analyze and integrate, while less than a fifth (18 percent) say environmental and just 10 percent say governance is the most difficult.

When it comes to the motivation behind ESG integration, by far the most popular response is improved long-term returns, at 42 percent, although risk mitigation and client demand also rank relatively highly at 27 percent and 22 percent, respectively. The other options offered – regulatory demands (2 percent) and brand and reputation (7 percent) – also offer insight into ESG motivations.

The virtually-held forum attracted 1,178 registrants representing asset managers, asset owners, banks, brokers and other stakeholders from 40 countries, according to Truvalue. Attendees were polled across a range of sessions to gather insights on ESG integration, with all questions answered by at least 100 delegates. 

Other findings included that most respondents are behind in – or have not yet started – preparation work to comply with new EU regulations around ESG disclosure. Although almost half (47 percent) say planning is well under way, more than a quarter (27 percent) say they are behind in planning, with a further quarter (26 percent) admitting they have not yet begun.

In answer to the question, ‘Is your investment framework aligned to the UN Sustainable Development Goals (SDGs)?’, 30 percent of respondents said no and that they had no plans to do so. Despite this, 28 percent of respondents say they currently have targets regarding SDG alignment, and a further 42 percent say such plans are in the pipeline.

Two final polls surveyed respondents on which ESG themes are likely to be the big drivers, both in the coming year and in the next three to five years. The resounding answer was climate change. Almost three fifths (57 percent) cite climate change as the biggest ESG driver of the coming year, rising to 70 percent for the next three to five years.

Although inequality ranks relatively high for the coming year, at 30 percent, just 11 percent say it will be the biggest driver over the longer-term outlook, suggesting that focus on inequality in 2020 may be short lived.

Gender diversity ranks low across both questions at 4 percent and 5 percent, respectively, but respondents see sustainable consumption – no doubt because of its links to climate change – as a growth area. Although 6 percent say it is going to be the biggest ESG driver in the coming year, this rises to 13 percent for the three-to-five-year time frame.