According to a report published by BNP Paribas this week, there is growing confidence across the investment community that assets with impressive Environmental, Social and Governance (ESG) performance are delivering strong financial returns.
As part of its ‘ESG Global Survey 2019’, BNP Paribas publish the results of a survey of 347 asset owners and managers, detailing their attitudes towards ESG issues and the maturity of their ESG strategies.
This report highlights that ESG integration - the incorporation of ESG factors into financial analysis and investment decision-making in order to enhance returns and/or mitigate risk - is no longer a peripheral exercise. This is due to investor demand, regulation and the wide-spread certainty about the strong link between ESG risks and long-term financial performance.
78% of survey respondents state that ESG is either playing a growing role or becoming integral to what they do as an organisation. Yet there are still mixed views on how to implement ESG integration and the quality of the ESG data that informs any integration. .
The survey also found 75% of asset owners and 62% of asset managers hold more than a quarter of their investments in funds incorporating ESG - a significant increase on the 48% of owners and 53% of managers who targeted more than a quarter of their investments at ESG products when the survey was undertaken in 2017.
52% of respondents now rank 'improved long-term returns' in their top three reasons for ESG investment, while 60% of all respondents expect their ESG portfolios to outperform the wider market over the next five years. When survey respondents were asked about the key barriers to ESG integration, the top three were data (66%), costs of technology (32%) and access to advanced analytical skills (30%).
The survey also revealed a significant number of investors are taking a holistic and wide-ranging approach to ESG engagement. For example, 65% said their investment framework was now aligned with the UN's Sustainable Development Goals (SDGs), while nearly a quarter state that ESG capability is embedded across their entire organisation.
For more information, and to download the report, please visit the BNP Paribas website.