Navigating the ESG landscape: Key drivers behind the sustainable investments spike


In a study by Deloitte and The Fletcher School at Tufts University, it has emerged that an overwhelming majority of global investors are now incorporating ESG considerations into their investment strategies.

According to ESG Today, conducted between January and December 2023, this comprehensive survey engaged over 1,000 investment professionals, including CEOs, Chief Investment Officers, and Heads of Strategy from various regions such as North America, Europe, and Asia. The results underscore a significant pivot towards sustainable investing, highlighting not only the prevalent adoption of ESG policies but also the factors motivating this shift and the challenges encountered.

Remarkably, 79% of respondents disclosed having established sustainable investment policies, marking a steep rise from a mere 20% five years ago. This trend is notably stronger in the U.S., where 83% of investors have embraced ESG policies, compared to 27% in the past, indicating a robust movement towards sustainability despite some opposition. European investors, while slightly behind, also demonstrate a substantial commitment with 75% reporting ESG policies in place.

The survey reveals three principal motivations driving the adoption of sustainability in investment decision-making: regulatory demands, the pursuit of improved financial outcomes, and stakeholder influence. Interestingly, U.S. investors place a significant emphasis on talent retention and attraction as a critical driver, second only to regulatory pressures.

Deloitte Risk & Financial Advisory principal, Chris Ruggeri, emphasized the pivotal role of regulatory changes, stakeholder expectations, and financial performance in steering the U.S. towards sustainable investment practices. Ruggeri advocates for enhanced sustainability disclosures to bolster investor confidence.

Despite the widespread use of sustainability data in investment analysis, the study identifies a consensus among investors regarding the inefficacy of current methods in integrating ESG factors into equity prices effectively. Moreover, the survey highlights challenges such as integrating ESG information, the inconsistency of ESG ratings, and the need for clearer corporate strategies on ESG goals as barriers to sustainable investment.

The trust in ESG data sources is found to be a key determinant in their usage, with in-house data systems and audited corporate disclosures ranking as the most trusted and utilized. The advent of standardized sustainability disclosure regulations is anticipated to ameliorate the current challenges associated with ESG data.

Echoing the sentiments on the importance of dependable sustainability data, Michael Bondar, a Deloitte principal, underscores the necessity for improvement in the collection, measurement, and reporting of sustainability data. Bhaskar Chakravorti of The Fletcher School highlighted global regulatory developments aimed at enhancing sustainability disclosures, signaling a growing emphasis on ESG data accuracy and reliability.

This study not only sheds light on the current state of sustainable investing but also outlines the trajectory for future ESG integration, underscoring the critical need for standardized reporting and the potential impact of regulatory developments on investment strategies globally.

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