A study by professional services firm EY into the ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. investing practices of Canadian asset managers found a wide spectrum of ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. integration across various managers, with some reporting completely embedding environmentalEnvironmental criteria consider how a company performs as a steward of nature., socialSocial criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. and governanceGovernance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights. factors into their investment processes and products, and a few only in the early phases of integration.
EY interviewed participants from 20 firms for the survey, with collective assets under management of over $2.5 trillion. Of those interviewed, half described themselves as fully ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. integrated across all portfolio managers and investments, 40% said they were somewhat integrated, and 10% indicated that they are in the early phases of integration.
According to the study, the primary driver for ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. integration has been client demand, with pension funds and endowments acting as the strongest drivers of the demand for sustainable investment. On the retail side, some asset managers reported that they are waiting for client demand before developing dedicated ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. funds, while high net worth clients appear increasingly interested in the purpose of wealth and are interested in investing their money for purposes beyond financial return.
The survey also explored the barriers to ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. integration, with the lack of data reported as the greatest challenge. One of the key issues mentioned by the asset managers is the lack of standardization in ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. reporting by companies creating barriers to proper analysis. Other key challenges include a lack of standardized taxonomies creating difficulties in measuring and comparing ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. impact across asset managers and against benchmarks; expanding reporting requirements, which makes it hard for less-equipped asset managers to keep up; and a lack of available talent with ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. expertise.
Other key findings from the survey include:
- ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. reporting. 90% of respondents report on their ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. efforts in some form. All of the surveyed asset managers were signatories to the UN Principles of Responsible Investing (PRI), with most reporting that reporting under the principles consumes significant time and resource commitments, with most requiring between two and five Full time employees for several weeks.
- ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. scoring and data. Each of the asset managers subscribe to at least one external data provider to support their ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. scoring, with Sustainalytics and MSCI the most commonly cited. Most respondents who have integrated ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. into their investment processes have also developed their own proprietary ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. scoring mechanisms, with a few indicating that they use alternative AI-based data sources to further support their ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. assessments, with some hoping to gain a competitive edge.
- Advisors unprepared. A key barrier to ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. investing for retail managers is a lack of advisor knowledge, with respondents reporting that advisors are unprepared to have conversations on ESGEnvironmental, social, and governance (ESG) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. investing, even when their clients are.
Click here to view the results of the EY survey.
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