Institutions want ESG data that investment firms lack

Morgan Stanley survey finds big gaps in what is wanted and what is available

Big investors want much more ESG data than asset managers tend to offer, a Morgan Stanley survey has found.

Globally, 88% of asset owners said that ESG reporting and disclosure was important in selecting asset managers, although just 39% of managers said they offered that, according to a report last week from the Morgan Stanley Institute for Sustainable Investing.

Similarly, 76% of owners said it’s important for managers to have a dedicated ESG team, while only 41% of asset managers indicated they have such teams.

Additionally, there were big discrepancies on investor communication on sustainability (73% versus 45%), ESG policies for products (76% versus 49%) and firm-level sustainability policies (87% versus 65%).

The firm’s survey was conducted by Coalition Greenwich in April and May among 201 asset owners and 100 asset managers in North America, Europe and Asia. The groups considered as asset owners were insurance companies, pension funds, financial institutions, foundations and endowments with at least $50m in investible assets.

In addition to the conclusions on ESG data, the report also found gaps between the types of thematic investment products asset owners are seeking and what managers provide. For example, 50% of owners are prioritizing climate change, while 33% of asset managers have funds that address it. Other gaps were in water solutions (30% versus 11%), education (24% versus 14%) and multicultural diversity (20% versus 12%).

Further, asset owners indicated they wanted metrics that investment providers tended not to have, including climate-risk stress testing (51% versus 22%) and climate-risk scenario analysis (51% versus 29%).

The survey also found that demand for sustainable investing continues to rise. Eighty-two percent of asset owners and 86% of asset managers in Europe said they have seen an increase in interest over the past two years. By comparison, 70% of owners and 69% of managers in North America said the same, as well as 92% of owners and 82% of managers in Asia.