US firms embrace ESG, but warn on data

Better data and impact reporting is needed for ESG approaches to succeed long-term, survey finds

ESG investing has been embraced by most large US fund managers, according to a Morgan Stanley survey, but better quality data is required if sustainable approaches are to be popular longer term, fund groups say.

The report, entitled Sustainable Signals: Grown and Opportunity in Asset Management, published by the Morgan Stanley Institution for Sustainable Investing and Bloomberg, found that 75 per cent of American fund firms have now adopted sustainable investment approaches.

The research was conducted among 300 representatives of US asset management firms that have at least $50 million in assets under management.

Crucially, 80 per cent of those polled said they believed that strong ESG practices can lead to higher profitability with respondents claiming that companies with better ESG practices may be better long-term investments.

“The survey results demonstrate that sustainable investment strategies are now a strategic imperative,” said Matthew Slovik, head of global sustainable finance at Morgan Stanley.

“It is clear that asset managers will continue to invest new resources and expand their product portfolios in the coming years.”

Those fund groups offering such strategies said they had received high client satisfaction and had noticed that products with an integrated ESG approach were popular. However, nearly all managers surveyed said there was a need for better data and impact reporting if the approach is to be embraced longer term.

“As investors increasingly consider sustainability factors across asset classes and investment products, we expect to see a shift toward better data tracking and reporting mechanisms,” Curtis Ravenel, global head of sustainable business & finance at Bloomberg said.

“This will increase credibility and improve measurement of impact across portfolios,” he added.