More than 80% of UK asset owners believe ESG is more important to them now than it was two years ago, despite backlash in the US and more complex issues coming to the fore.
Research carried out by Hymans Robertson, and published in the report ESG: Reports of my demise have been greatly exaggerated, found 81% of the 100 UK asset owners surveyed said ESG is more important that two years ago, while 87% still see stewardship as being effective in driving change.
Further, 83% agreed managers should facilitate financing the low-carbon economy, and 90% think managers should use influence in the investment value chain.
The report commented: “In the US, intense political rhetoric and reversals of climate policies have fuelled a perception that responsible investment (RI) is no longer relevant. Because when large US asset managers and service providers reduce their sustainability activities, doesn’t the rest of the world follow suit?
“We don’t accept this narrative, and – crucially – it isn’t what our clients tell us about their beliefs and needs.”
See also: ESG backlash? Not in the UK
It continued UK asset owners are taking ESG issues seriously and acting on them. Some 51% of the clients surveyed said they had conducted engagement specifically about declining ESG/stewardship capabilities in the current environment, and 48% reported undertaking more RI/stewardship activities.
In terms of expectations, 67% of asset owners expect their managers to do more on responsible investment.
“There’s a growing schism between asset managers’ activity and investors’ expectations,” the report said. “Where investment managers step back, investors must step up to ensure their voice is heard. This is most acute in relation to climate change. It’s clear that long-term investors recognise the critical role of asset managers in identifying and addressing climate-related risks.”
88% of respondents want to see managers explicitly acknowledge climate as a systemic risk, while 82% said managers should have the tools/data required to assess climate risk and opportunities.
However, there was acknowledgement that ESG issues are becoming more complex and challenging – with 90% citing this as a concern.
The report said: “This isn’t surprising as intensifying physical climate-related risks catalyse record insurance losses; geopolitical tensions raise questions around defence investment and supply-chain vulnerability; and new technologies, particularly AI, create new challenges. What may be more surprising is that 35% of those surveyed say they’re now much more comfortable regarding ESG, with qualitative reasons including improved transparency, reduced greenwashing and greater alignment with tangible real-world outcomes.”
Commenting on LinkedIn about the research Jamie Broderick, board member for the Impact Investing Institute, said: “If UK asset managers are stepping back from sustainability because they think the vibe has changed in the US, they should definitely to do a reality check with their UK clients.”
