30% of investment managers not considering ESG across all asset classes

Almost a third (30 per cent) of investment managers are still not considering environmental, social and governance (ESG) factors across all asset classes, LCP’s has revealed.

Its latest responsible investment survey found that there was “significant room for improvement” around ESG investment considerations, with action to address climate relate-related risks remaining “surprisingly weak”.

Despite 85 per cent of investment managers stating that they integrate ESG factors with the aim of improving long-term investment outcomes and a further 88 per cent being PRI signatories, the survey found that in 14 per cent of cases, climate-related risks are not considered at all.

Furthermore, of the five specific actions that can be taken to manage climate-related risks, investment managers are undertaking, on average, just 1.7 per asset class.

LCP principal and head of responsible investment, Claire Jones, commented: “The survey results around climate change considerations are particularly worrying, especially given the widespread pressure on institutions to respond to growing demands for a faster transition to a net zero carbon economy.

“The lack of clear engagement policies when it comes to responding to the challenges and expectations of modern society is also concerning. Stewardship is a vital element of that response, enabling investment managers to help create long-term value for our clients and their beneficiaries, whilst simultaneously providing sustainable benefits for the economy, the environment and society.”

The report found that only 52 per cent of managers give a “reasonably detailed” description of their approach to engaging relevant parties on climate change, with this engagement reducing to 40 per cent when addressing their approach for boardroom diversity, and 23 per cent for fair pay and benefits.

However, investment managers overall scores, rated on a scale of 1 to 4, have improved from an average of 2.3 in 2018 to 2.6.

Commenting on this trend, Jones, added: “In line with the greater focus on responsible investment, it is encouraging that we have seen an uptick in managers’ overall scores. Additionally, successful implementation of the PRI principles will improve investors’ ability to meet their commitments to beneficiaries, as well as better align their investment activities with the broader interests of society.

“Despite the progress revealed by our survey, there is still some way to go, especially when addressing climate-related risks and ensuring that ESG factors are systematically considered across all asset classes.”

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