ESG factors influence investment

Mike Taylor

Managing Editor and Publisher

25 October 2023

ESG considerations have become even more deeply embedded in investment decision-making, according to the latest ESG Manager Survey conducted by Russell Investments.

The survey, released this week, has found that only 7% of managers surveyed claimed that ESG factors did not influence investment decisions, compared to 22% in the same survey last year.

The Russell survey noted that 2023 had seen the strengthening of reporting requirements in Europe, Canada and Australia and the rise of a more contentious debate in the US.

“For active managers, key challenges include the availability of data, the lack of standardised reporting for corporates, and meeting diverse client needs,” the Russell analysis said.

“Globally, investors have grappled with these challenges amidst weaker economic and business performance. Nevertheless, the number of managers reporting that ESG considerations don’t affect their investment decisions has continued to fall, while commitments to responsible investing reporting frameworks and initiatives have continued to rise.”

“Our research suggests that ESG has firmly established itself as a lasting force in the investment landscape.”

The report listed the key highlights from Russell Investments’ 2023 ESG Manager Survey as being:

• Dedicated ESG hiring: 75% of participants added dedicated ESG personnel in the past year across various functions such as ESG teams (23%), data integration and analytics (10%), stewardship (9%), and equity investment (7%). Compliance emerged as a frequently added role under the “other” category for new ESG roles.

• Regulatory push: There is rising demand for ESG-specific compliance due to increasing regulatory requirements, primarily in the UK and Europe.

• ESG integration and active ownership: Active ownership has become the top ESG information source. A significant shift was observed, where only 7% claimed that ESG factors do not influence investment decisions, down from 22% in 2022.

• Factors impacting investment decisions: ESG considerations such as materiality to reduce security risk (26%), ability to drive positive returns (19%), governance concerns (19%), climate risk (15%), and social risk (15%) prominently shape investment choices.

• Increased ESG metric reporting: 66% of managers reported ESG metrics for all funds, an increase from 59% in 2022. Carbon emissions (56%) stood as the top metric, followed by diversity statistics which saw a rise (24%, up from 19% in 2022).