A significant shift in investment priorities has been noted among global asset owners, with environmental factors increasingly coming to the fore.
According to ESG News, Morningstar’s latest Voice of the Asset Owner Survey reveals that 64% of respondents now deem environmental issues more financially relevant than they did just a year ago, marking a rise from 52% in 2023. This trend underscores a growing awareness and prioritization of climate concerns over social and governance issues within the investment community.
The survey highlights that climate change, especially the transition to net zero emissions, tops the list of environmental concerns, cited by 55% of asset owners. This concern not only reflects the urgent need to address climate change but also its burgeoning materiality in financial decision-making processes. A U.S. corporate pension fund participant emphasized this point, stating, “Climate is the lead and that’s because the data that’s available is better.”
Furthermore, the report delves into the broader context of environmental, social, and governance (ESG) factors within institutional investment strategies. Remarkably, 80% of respondents view ESG considerations as having a neutral to positive impact on their fiduciary duties. This perspective aligns with a growing recognition that addressing ESG factors, particularly environmental issues, is part of fulfilling fiduciary responsibilities.
Asset owners are not just passively considering ESG factors; they are actively engaging with them. About 78% believe that direct engagement with portfolio companies via active ownership is the most effective method to drive ESG policies. This is followed by involvement in public policy and participation in collective initiatives like Climate Action 100+. While proxy voting remains a tool for influence, it is perceived as less impactful compared to direct engagement.
Despite these advances, the demand for improved ESG data quality persists. Asset owners call for better accuracy, standardization, and relevance in ESG data to enhance sustainable investment practices. A significant 43% of respondents pointed to ESG data as the most critical tool for implementing ESG strategies, far outweighing the utility of ratings and indexes.
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