Asset manager execs fear legal risk from failing sustainability rules

Simmons & Simmons report finds reputation also plays a decisive role

The biggest concern of senior executives in the asset management and investment funds industry is the legal risk associated with failing to comply with sustainability regulations, according to a survey.

More than half (53%) of those polled said this was their current main concern. Reputation also plays a decisive role, with 59% of respondents regarding the prospect of reputational damage from legal action as a greater concern than facing legal penalties. 

The findings, from a poll of 700 global senior executives and major investors most of whom represent billion dollar companies, are in a report by London-based law firm Simmons & Simmons, A sustainability state of mind: unlocking growth and profit.

The majority of firms think regulatory overreach could harm efforts to improve sustainability, according to the report, yet businesses also think there are gains to be made from going beyond reporting requirements for sustainability.

Yet despite challenges to sustainability investment following recent shocks to the global economy, the vast majority of leading businesses and investors regard sustainability as an avenue to profit and growth.

More than eight in 10 (84%) of executives and investors think businesses investing most effectively in sustainability will perform best within the next decade.

A majority of respondents (61% executives and 66% investors) believe businesses playing more of an active role in creating a sustainable economy will outperform those who are merely minimising their impact.  

Senior business executives regard securing access to finance as the biggest prize on offer in sustainability. Yet they are not fully aligned with investors’ needs, who expect businesses to take more action on ESG.

There is now significant interest in the blue economy ahead of other areas in sustainability, with business and investor focus now shifting to the blue economy. Biodiversity has also rapidly risen up the business agenda, while investing in D&I internally is a high priority.   

Regional allocations

Elsewhere the report found North America remains a priority for ESG investing, with 57% of investors and businesses viewing the region as a destination for ESG allocations, 46% saying the same of Europe and 42% for developed countries in Asia-Pacific.

Commenting on the report, Sonali Siriwardena, global head of ESG at Simmons & Simmons, said: “This research shows that the majority of businesses see sustainability as a vehicle for growth and profit, rather than just another box to tick.

“In the face of challenges to ESG investment, there is consensus from senior executives and investors that those who go furthest today will make the greatest gains tomorrow.”