September 18, 2024

Confidence in the availability of ESG data grows among asset owners according to FTSE Russell global survey

  • Concern about availability of ESG data and use of estimated data has dropped from the most significant barrier to adopting sustainable investment (SI) last year to sixth this year
  • Aligning portfolios in accordance with SI/climate guidance is the most challenging factor for asset owners to meet regulatory requirements
  • SI is still being implemented with a hybrid approach; however, the increasing demand for passive instruments has overtaken active 

FTSE Russell, the global index provider, has today published the results of its annual global asset owner survey1 analysing how SI is perceived, considered and used by asset owners across the world.

SI implementation and evaluation is directionally down globally (falling from 80 per cent in 2023 to 74 per cent in 2024). There is a variance between small and large asset owners with SI implementation being higher for larger asset owners (86 per cent), but smaller asset owners (63 per cent) are seeing a downward trend. 

Growing confidence in SI data

Concerns about the availability of ESG data and the use of estimated data has fallen from being the most significant barrier to adopting SI to sixth this year (50 per cent in 2023 to 22 per cent in 2024). Historically, concerns about the availability of ESG data was ranked the number one concern for asset owners in 2022 and 20232. The lack of standardisation in ESG data, scores and ratings has dipped from the second to the eighth most important barrier (37 per cent in 2023 to 20 per cent in 2024).

Barriers to increased SI adoption among asset owners have shifted to resources, methodology, and strategies. Almost two in five (39 per cent) asset owners state that concerns about SI methodology are the biggest barrier to increased adoption across all asset classes, a rise from 18 per cent in 2023. Furthermore, a quarter (25 per cent) of asset owners state that questions about how to determine the best strategy or combintion of strategies for their portfolio is a key barrier to SI adoption, rising from eight per cent in 2023.

Lack of trust in data quality (38 per cent, compared to 58 per cent in 2023) is no longer the top challenging factor for asset owners to meet regulatory requirements; the challenge to align portfolios in accordance with SI/climate guidance has risen to the top instead (51 per cent). 

Stephanie Maier, Head of Sustainable at FTSE Russell, comments: “Sustainable investment remains a major focus area for asset owners globally while contending with significant regulation and challenging market conditions. The top challenge for asset owners in now focused on the implementation and portfolio alignment with sustainable and climate objectives. As an index provider, we play a crucial role in supporting our clients with solutions, data and insights to address this challenge.”

Fiona Bassett, CEO at FTSE Russell, comments: “As confidence in available SI data grows, the types of strategies asset owners are choosing are evolving. There has been a meaningful and sustained shift towards passive SI strategies, which are now directionally overtaking active ones for the first time. As our clients become increasingly more comfortable with SI data, we expect the shift of strategies from active towards passive to continue to grow.” 

Passive overtakes active

SI is still being implemented with a hybrid approach, however the increasing demand for passive instruments has directionally overtaken active (66 per cent passive vs 61 per cent active).

While active still holds the larger AUM for global SI bond & equity ETFs & mutual funds (58% to 42%), directionally the fund flows are stronger into passive ($65bn inflows in the 12 months to June 2024) than active ($26bn outflows in the 12 months to June 2024)3.

This year’s data shows a trend of asset owners taking investment decisions back in house with the use of external investment managers having dropped significantly over three years (46 per cent in 2022, 31 per cent in 2023, falling to 24 per cent in 2024).

Changing views on SI regulation

  • 34 per cent have changed fund name and description by removing ESG/SI terminology to comply with regulatory requirements
  • 28 per cent have changed fund compositions to comply with regulatory requirements
  • 10 per cent felt SI/ESG regulation did not help them meet their SI goals in 2024, compared to 25 per cent in 2023
  • 51 per cent feel SI regulation helps remove barriers to SI adoption – this has increased from 40 per cent in 2023.
  • 52 per cent state regulations relating to sustainable or climate benchmarks is the most helpful regulatory development for investors. This is followed by the code of conduct for ESG data and ratings providers (51 per cent).

Rise in biodiversity

  • 21 per cent have already started incorporating assessments of the risks/impacts associated with natural capital/biodiversity into investment strategies. Additionally, this theme is on the agenda for asset owners in EMEA (44 per cent) and Asia Pacific (39 per cent) in the next year.
  • 52 per cent who said biodiversity / natural capital was a priority for their organisation are currently directly investing in or adjusting investment weightings based on biodiversity/natural capital.

To read the full report, please visit the FTSE Russell website

 

Notes to editors:

1 Since 2018, FTSE Russell has annually interviewed asset owners globally to understand their priorities, frustrations, and opportunities in SI. FTSE Russell spoke to 303 asset owners with AUM between US$5.3 trillion and US$9.2 trillion between March 4 – April 8, 2024.

2 Number of asset owners who are concerned about the availability of ESG data and the use of estimated data as a barrier to increased SI adoption:

2024 22% (sixth most significant barrier)
2023 50% (first most significant barrier)
2022 50% (first most significant barrier)
2021 42% (third most significant barrier)

3 Data from LSEG Lipper

Contacts

LSEG Press Office

Hayley Fewster
+44 (0)20 7797 1222

newsroom@lseg.com
www.lseg.com

About FTSE Russell, an LSEG business

FTSE Russell is a global index leader that provides innovative benchmarking, analytics and data solutions for investors worldwide. FTSE Russell calculates thousands of indexes that measure and benchmark markets and asset classes in more than 70 countries, covering 98% of the investable market globally. 

FTSE Russell index expertise and products are used extensively by institutional and retail investors globally. Approximately $15.9 trillion is benchmarked to FTSE Russell indexes. Leading asset owners, asset managers, ETF providers and investment banks choose FTSE Russell indexes to benchmark their investment performance and create ETFs, structured products and index-based derivatives.

A core set of universal principles guides FTSE Russell index design and management: a transparent rules-based methodology is informed by independent committees of leading market participants. FTSE Russell is focused on applying the highest industry standards in index design and governance and embraces the IOSCO Principles. FTSE Russell is also focused on index innovation and customer partnerships as it seeks to enhance the breadth, depth and reach of its offering. 

FTSE Russell is wholly owned by London Stock Exchange Group. 

For more information, visit FTSE Russell.

© 2024 London Stock Exchange Group plc and its applicable group undertakings (“LSEG”). LSEG includes (1) FTSE International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE Global Debt Capital Markets Inc. and FTSE Global Debt Capital Markets Limited (together, “FTSE Canada”), (4) FTSE Fixed Income Europe Limited (“FTSE FI Europe”), (5) FTSE Fixed Income LLC (“FTSE FI”), (6) FTSE (Beijing) Consulting Limited (“WOFE”) (7) Refinitiv Benchmark Services (UK) Limited (“RBSL”), (8) Refinitiv Limited (“RL”) and (9) Beyond Ratings S.A.S. (“BR”). All rights reserved.

FTSE Russell® is a trading name of FTSE, Russell, FTSE Canada, FTSE FI, FTSE FI Europe, WOFE, RBSL, RL, and BR. “FTSE®”, “Russell®”, “FTSE Russell®”, “FTSE4Good®”, “ICB®”, “Refinitiv” , “Beyond Ratings®”, “WMR™” , “FR™” and all other trademarks and service marks used herein (whether registered or unregistered) are trademarks and/or service marks owned or licensed by the applicable member of LSEG or their respective licensors and are owned, or used under licence, by FTSE, Russell, FTSE Canada, FTSE FI, FTSE FI Europe, WOFE, RBSL, RL or BR. FTSE International Limited is authorised and regulated by the Financial Conduct Authority as a benchmark administrator. Refinitiv Benchmark Services (UK) Limited is authorised and regulated by the Financial Conduct Authority as a benchmark administrator.

All information is provided for information purposes only. All information and data contained in this publication is obtained by LSEG, from sources believed by it to be accurate and reliable. Because of the possibility of human and mechanical inaccuracy as well as other factors, however, such information and data is provided "as is" without warranty of any kind. No member of LSEG nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the accuracy, timeliness, completeness, merchantability of any information or LSEG Products, or of results to be obtained from the use of LSEG products, including but not limited to indices, rates, data and analytics, or the fitness or suitability of the LSEG products for any particular purpose to which they might be put. The user of the information assumes the entire risk of any use it may make or permit to be made of the information.

No responsibility or liability can be accepted by any member of LSEG nor their respective directors, officers, employees, partners or licensors for (a) any loss or damage in whole or in part caused by, resulting from, or relating to any inaccuracy (negligent or otherwise) or other circumstance involved in procuring, collecting, compiling, interpreting, analysing, editing, transcribing, transmitting, communicating or delivering any such information or data or from use of this document or links to this document or (b) any direct, indirect, special, consequential or incidental damages whatsoever, even if any member of LSEG is advised in advance of the possibility of such damages, resulting from the use of, or inability to use, such information.

No member of LSEG nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing in this document should be taken as constituting financial or investment advice. No member of LSEG nor their respective directors, officers, employees, partners or licensors make any representation regarding the advisability of investing in any asset or whether such investment creates any legal or compliance risks for the investor. A decision to invest in any such asset should not be made in reliance on any information herein. Indices and rates cannot be invested in directly. Inclusion of an asset in an index or rate is not a recommendation to buy, sell or hold that asset nor confirmation that any particular investor may lawfully buy, sell or hold the asset or an index or rate containing the asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.