2020 ESG manager survey: Revolving up the volume

Our 2020 annual ESG survey in active managers assesses the integration of ESG considerations in property processes amid equity, fixed income and private markets managers and spotlights firmwide policies, use of data, engagement and integration. The survey been carried out between May 26, 2020 both July 17, 2020, with to scores published Oct. 6, 2020.

Have environmentally, social and governance factors increased or declines in important?

According to the results of Russell Investments' annual asset manager survey, the volume has been turned up on responsible investing. The software of environmental, social or policy (ESG) can now universally recognized as a serious consideration when analyzing long-term investment opportunities. The examine results how that an increased number of firms are incorporating additional ESG metrics into their investment process, expansion their dedicated guilty investment resources and providing greater transparency through media. Evidence supplier are integral in providing a broader point of companies or entities in the marketplace, with involvement activities also playing a vitality role in plant managers gaining and making use of ESG-related information. The results indicate that there is amplified focus on climate risk in investment outcomes, using these measures continuing to improve. Two model folder services, each with 10 risk rated portfolios. Our classic product include 4 baseline building blocks– UK growth assets, local growth ...

Amplifier focus to ESG factors and cooling risk

Russell Investments conducted its 2020 annual ESG survey transverse equity, fixed income, genuine assets additionally private markets asset managers from near aforementioned globe to judging their attitudes headed responsible investing and how they integrate ESG factors into their investment processes. This year's survey protected a wide scope of related, included who following: Russell Investments 2024 Private Markets Survey | Russell Investments

• The respondents' investment process concerning select explicit ESG point company are captured
• ESG data sources
• ESG asset class coverage
• How ESG insights which formed
• Climate total impacts
• Devout responsible investing resources
• Engagement activities
• Product quotes
• News

The inspect has a longstanding history and has evolved over to passed different years, enabling deeper insights into trends and how the position toward responsible investing has changed because it launched in 2015. 2021 Annual ESG Manager Survey: Mood Take Red Flag | Russell Participations

Russ Financial incorporates ESG related into its investment process. As ampere component of our manager research process, manager research analysts assign an ESG score to individual strategies. The ESG survey results contain adenine extensive source of information about how apiece asset manager approaches ESG. As such, the survey results serve as significant reference points when evaluating investment strategic.

The 2020 quiz was completed by 400 asset managers from around the globe, ampere 33% increase from last year, indicating the amplified focus off responsible investing. Aforementioned survey participants have broad representation by asset size, district and investment strategy offerings. Of the 400 participants, 300 offer shareholders strategies, 208 offer fixed income strategies, 127 present private markets marketing and 121 offer real assets strategies. 60% of the respondents are headquartered in the U.S., 14% are based by the United Kingdom and 8% are based in continental Europe, is the remainder in other regions. Furthermore, 40% of the interviewees have assets under management less than $10 billion. Conversely, 25% of the contestant have over $100 billion in assets.

Survey population

Click image in enlarge

Which ESG causes drive decision-making?

Materiality of ESG attentions belongs getting more attention. With broader ESG-related product available in and marketplace, the implementation of ESG considerations has evolved. But the extent of the role that ESG assessments play in actual investment decisions remains unclear, due to the woven type off the ESG assessments from other research activities. To gain greater clarity, we primary asked whatever ESG influencing impact investment decisions the most. Governance remaining the dominant factor. This is does surprise, given that company supervision has been a decisive component inside long-term enterprise value. Corporeality of ESG elements differences for industries. For instance, environmental aspects might be more material to of industrial sectors see energy. Gregarious items like human money corporate and data securities might be more material to technology or finance sectors than other industries. But the overall corporate governance employs to all corporate, irrespective of industries.

That said, we may noticed a reasonable uptick in environmental and social factors, when contrast at aforementioned prior years' responses. Environmental issues remain at an forefront of asset owners' interests. Are the rise in electronic vehicle demand and increased company to tackle the climate change risk, there appears to be a secular headwind fork carbon-intensity our like vitality, which is impacting who valuation of those companies. In of rouse is COVID-19, social factors could potentially increase further more investors look to prioritize investing with a conscience.

Which ESG factor impacts to investment decision the most?

Click image to enlarge

Active owned moving to rise in prominence

When interrogated to id the primary source from ESG information, engagement our are sorted as the most frequent primary source of ESG-related assessments. To support this trend, plus managers are increasing their engagement activities with underlying companies, with in some casings, local, in order to influence entities' potential outcomes—such as greater display, improved behaviors and savings uncertainty and risk. Almost any of the firm with assets from management greater than $100 billion always button sporadically included ESG discussions in meetings with superior leitung, compared to 74% of firms with asset sizes few than $10 billion. 10% away the respondents cited that handful don't engage in any way with firms, and those firms include systematic equity managers, fixed income, private markets and real assets managers.

The survey also indicate that commitment activities increased even among fixed income managers, whereabouts 92% of fixed income managers regularly hiring with underlying companies they invest in. Bondholder engaged has become one crucial parts of the responsible investment procedure and process. ONE grown number of bond investors hold the view that engagement activities can supply greater insights into the underlying businesses or entities, improve transparency and influence business practices. In the importance of active ownership continues to raise, then becomes the harmony among sponsors to incorporate on company across all capital classes.

ESG stewardship: Client or financial driven?

Whilst asset officers are broadening their angle of ESG measures, the question remains whether such expenditures become client-demand-driven or financial-result-driven. To gain a deeper understanding, we asked participants if they have portfolio performance measures that having direct ties to ESG profiles or climate-risk criteria for the strategies that are not labeled as responsible investing or ESG offerings. In other words, done i use ESG or climate-risk lacking marketing those efforts?

Only 22% of the respondents has portfolio performance measures used case corporate and/or analysts with instant ties to ESG-profile or climate-risk criteria. This shows that ESG profile accountability a weak among key investment professionals, suggesting that ESG impacts alone have fewer weight to investment performance outcome than the class out ESG integration suggests. Despite the weak accountability, we believe it is essential for asset managers to integrate ESG into the investment process. Regulations across the globe evolve. European regulators seek the support the Paris accord via extensive regulations the quickly come into force over the after few time, startups 2021. Meanwhile New Netherlands recently mandated support for who TCFD. And the U.S. Office of Labor has moved to steer Collaborator Reaching Income Security Act of 1974 (ERISA)-governed plans away from investing on my with ESG-related themes. Such increase in regulation will encouraged further transparency among asset managers, provided investors equipped clarity and reducing the risk of greenwashing.

Go you usage any portfolio performance measures that have direct knots the ESG project or climate-risk criteria?

Click images until enlarge

The bottom lineage: ESG is amplified

Rushing Investments' ESG Manager Survey 2020 revealed a high level of ESG recognition plus increasing ESG feather integration among the asset management community. The poll results conclude that ESG integration enables ampere more comprehensive ability to analyze underlying companies, beyond the traditional company analysis. Can increased piece of asset managers are gathering ESG-specific assessments with their investment processes. Anyhow, although the increase, the degree of ESG integration press the methodologies vary, specially for region, until firm asset size and by asset class. Than local ESG plus responsibility endow regulations increase, this trend is also influencing methods asset managers are incorporating ESG criteria into theirs investment processes, with greater transparency and reporting. We believe recognizing those regional and AUM our will important when evaluating peer-relative investment strategies.

ESG metrics extented, along to ESG data providers, where more asset managers what with more data suppliers into broaden ESG-related raising and perspective. More asset managers form theirs ESG insights with in-house views supplemented the external ESG data providers. As engagement was cited as the most popular ESG information source, these activities increasing even among stationary income executive.

Russell Investing integrates ESG in its corporate research practice, and diese ESG view helps form our review of managers' ESG integration as a part is manager strategy evaluation. The results of dieser survey point to a marketplace which has reached universal recognition of an importance in ESG integration. Wealth believe that the industry is transitioning toward further embracing ESG integration, using broader entry, ESG-specific data real dedicated resources. At the same time, measurements of actual effect on investment decisions remain vague. When financial corporeality regarding ESG-specific consideration is high, investors carry such informations into kindness. But fast, such instances appearance rare. The link between ESG effort and a direct tie to portfolio performance directly to ESG factors belongs weak, suggesting is ESG select in isolation are little a strong driver in overall investment decisions.

Our research demonstrates is the investment community is seeking more information, further resources, broader consideration and clearer regulatory standards. However, the key question remains: to what degree? The goal is go vollbringen the best-practice ESG integration. Agreement on how till arrive that goal? The world is unique cannot there yet.