ESG phenomenon: where is the global growth?
Developments and comments in and around the ESG investment space.
In its fifth market study of the sector, the Global Sustainable Investment Alliance (GSIA) reported that responsible investing increased by 15% between 2018 and 2020. Assets reached $ 35.3 trillion for the period, representing 36 % of global assets managed by professionals, a 2 percent increase from two years earlier. Figures include retail, wholesale and institutional assets that carry a lasting mandate. In developed markets, retail investors are increasingly part of the ESG growth story, but the space is still largely dominated by institutional investors from developing markets.
The United States and Europe continue to dominate the global portion of the market, holding over 80% of global sustainable investment assets between 2018 and 2020. See breakdown below.
Some of the strongest regional growths have been recorded in North America and Japan. Canada leads the market with 62% growth in sustainable investment assets, followed by Europe at 42%, Australasia at 38%, the United States at 33% and Japan at 24%.
The alliance compiled the report from data submitted by its global members who track sustainable investing activity in their regions. It also takes into account investments that tackle climate change, for example, but do not fall under an integrated ESG investment.
As the industry has grown significantly and been inundated with competing terminology and standards, the alliance said it revised its ESG definitions last October “to reflect the most recent practices and thinking.”
He found that the most common sustainable investing strategy is ESG integration, followed by negative screening, corporate engagement and shareholder action, standards-based screening, and themed investing. sustainable development.
Here are those definitions for reference:
The report also describes an industry in transition, highlighting the different paths the regions are taking and some of their distinct drivers. This graph explains in part how the main markets differ in their approaches to sustainable investing and what levers they use (the figures are in billions):
The report found that some regions, such as Europe and Australasia, are slowing their growth rate or have experienced a reversal. “In both cases, this is largely due to changes in the way sustainable investing is defined, either by law as in the case of the EU, or by new industry standards, as is the case in Australasia, ”he said.
An ESG survey by the Axa Group clearly finds the top priority in accounting
ESG appears to be everything for all clients and nothing at all, according to AXA Group’s latest survey of the hot investment space. A global survey of 11,000 investors in 11 countries conducted by Architas, the company’s investment arm, found that the term “ESG” is recognized by only one in five investors in Europe and one in three in Europe. Asia. The term “sustainable investment” has become more prevalent, but only among half of the investors surveyed.
Just as the pandemic has shown the power of a clear public message, ESG risks becoming an investment phenomenon that can only be explained within the fund management bubble. More clarity is especially important for retail investors if they are to become more comfortable with ESG on the road to financial security, which is their most important investment concern.
Improving transparency is the main call to action to make ESG investing more attractive to investors in Europe and Asia. Improving product labeling is also a major demand from investors in both regions. Data protection and cybersecurity were ranked second and third among the priorities.
It is now important to define ESG terminology well and to attract clients who have not yet invested. Nine in ten non-investors surveyed by Axa said ESG factors were “potentially” important in deciding whether and how to invest.
“In financial services, there are many different terms and phrases that attempt to describe products and approaches that do very similar things in the ESG space. But, in the absence of consistent industry standards, this labeling and re-labeling could become a source of confusion. This may make retail investors less confident in changing their investing behavior, ”the report says.
The perception that ESG primarily equates to tackling climate change is also dispelled. This study found that people care about issues in all areas of the environment, social and governance, with governance factors considered to be the most important overall.
The old question of results
Investor skepticism about the performance of ESG funds compared to non-ESG funds has largely vanished. However, ESG funds have a reputation for being more expensive than non-ESG funds. “Fees are an issue that must be addressed. As is the need for transparency about the nature, objectives and ESG performance of the stocks invested. Our research clearly demonstrates a strong appetite and perceived value for more detailed ESG information,” indicates the mentioned report.
The report found that just over half of investors in Europe and 68 percent in Asia would consider paying more fees to invest in ESG funds, and they overwhelmingly want mandatory detailed information on the performance of companies in which they invest according to ESG criteria.
The report concluded that the industry needs to translate ESG into a digestible format for retail markets. It needs to better understand clients’ ESG needs and help educate those clients on how best to integrate those needs into their portfolios.
A quarter of investors in Europe and Asia said they had not had a conversation with their advisor about ESG factors or responsible investing in the past. When this happened, it was likely that it had been initiated by the client rather than the advisor.
The survey was conducted online between January and March 2021 in Belgium, France, Germany, Italy and Spain. In Asia, it has been carried out in Hong Kong, Japan, the Philippines, Singapore, Thailand and Indonesia.