Asset owners persistently boost ESG allocations amidst surging challenges


A survey by Morningstar has found asset owners continue to increasingly allocate resources into strategies that integrate ESG factors.

In the comprehensive report titled “Voice of the Asset Owner Survey 2023”, which witnessed the participation of 500 asset owners across North America, Europe, and Asia Pacific, representing a colossal combined asset exceeding $10.7tn, a unanimous allocation of at least some portion of their assets to ESG-conscious strategies was observed.

Remarkably, there’s a notable uptick in entities having at least half of their assets directed towards such strategies, leaping to 34%, up from the previous year’s 30%.

As per the geographical dissection of data, 46% of asset under management (AUM) are now committed to strategies involving ESG considerations in Europe, in contrast to APAC’s 41% and North America’s 36%.

Undeniably, 67% of asset owners attest to the magnified materiality of ESG over the past half-decade, while 52% accentuate the enhanced significance of environmental components especially over the past year. A noteworthy 52% and 57% of asset managers underline net zero emissions and diversity & inclusion, respectively, as influential in investment decision-making.

Challenges, however, have not subsided, with 38% of asset owners in 2023 flagging impact on returns as a paramount obstacle, experiencing a subtle ascend from the preceding year. A significant 30% spotlight the lack of standardised data, and 29% criticise unreliable or outdated data as deterrents to ESG investment strategy.

The onus of regulatory factors also magnified, witnessing about 30% of asset managers identifying regulation as a blockade, an upswing of ten percentage points over the last year.

Morningstar Indexes head of ESG Strategy Thomas Kuh commented, “The second Morningstar Voice of the Asset Owner survey confirms that institutional investors remain highly committed to integrating ESG factors into their global investments, but challenges related to lack of regulatory clarity and the need for better data and resources continue to persist.”

As for Arnold Gast, ESG Research Director at Morningstar Sustainalytics, he remarked, “As stewards of some of the largest pools of global capital, asset owners have stayed anchored to their fiduciary duty despite a range of challenges related to ESG market data, regulatory confusion and market performance. As their job becomes increasingly complex, asset owners continue to raise their expectations of a range of key stakeholders to provide better insight, research, data and tools to address the evolving sustainable investment landscape.”

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