State Street poll finds lack of data key barrier to adopting ESG

05 April 2017   Category: News, Asia, Global, USA   By Asia Asset Management

A majority of Asia Pacific (APAC) institutional investors are implementing an environment, social and governance (ESG) framework in their investment processes, but a lack of transparent, standardised, quality data remains a key barrier in their adoption of ESG strategies, according to results from a global survey released recently.

The findings from the survey by US-based financial services provider State Street Corporation (State Street) underscore the gap between aspiration and full integration of ESG in investment decisions.

It “reflected a clear outcry for transparent, standardised and quality ESG data”, State Street said in a statement last week (March 29).

The company polled 582 institutional investors who are, or plan to, implement ESG into their investment process, as well as 750 individual investors, for the study. It was led by State Street’s Centre for Applied Research and co-authored by Professor Bob Eccles of the Harvard Business School.

The survey found that 72% of APAC institutional investors are implementing an ESG framework in their investment process, and that many traditional barriers to ESG integration are receding. For example, a majority of investors polled believe it is possible to align material ESG issues and financial performance, and do not believe ESG equals lower returns.

However, 87% of APAC institutional investors and 92% globally want companies to explicitly identify ESG factors that materially affect performance. Some 58% in APAC and 60% globally say that a lack of industry standards for measuring ESG performance is a significant barrier to full integration.

“The promise of ESG integration starts with data,” Lou Maiuri, executive vice president and head of State Street Global Exchange and Global Markets businesses, says in the statement. “It is grounded in data transparency, engagement and the goal of creating a future intelligent approach to investing.”

He adds that “having a custodian for data has become just as critical as having a custodian for financial assets when trying to deliver long-term value creation for all investors and the society as a whole”.

State Street says it has developed a model to “help move investors from ESG aspiration to true integration”.

“Asia Pacific institutional investors are placing an increasing importance on sustainability and climate-risk when they assess their portfolio holdings. We’ve seen significant progress in investors’ understanding of ESG over recent years but believe further progress can be made to move more investors from awareness to full ESG integration,” says Mr. Maiuri.

State Street had US$2.47 trillion in AUM as of December 31, 2016.