The survey revealed that less than 30% of the 236 participating firms can report on their portfolios' carbon-related metrics, indicating a major challenge for investment managers. Data limitations and non-standardized reporting frameworks were cited as the main obstacles in ESG reporting.
In addition to these challenges, the survey disclosed that climate risk has become the most prevalent ESG issue among clients, with 45% of respondents identifying it as a top concern. This marks an increase from 39% in the previous year. Climate change and environmental issues were also the leading ESG concerns for 68% of respondents' clients.
The survey also indicated a rising interest in energy transition among asset managers, with 26% of respondents now signatories to the Net Zero Asset Managers initiative, up from 10% in 2021.
Action Items for Investment Managers
To address these challenges and ensure readiness for the ESG reporting revolution, investment managers should consider the following action items:
- Prioritize data collection: Enhance ESG reporting capabilities by focusing on collecting relevant and reliable data. This will help investment managers better understand their portfolios' impact on ESG factors and make more informed decisions.
- Develop standardized reporting frameworks: Engage with industry partners, regulators, and stakeholders to establish standardized reporting frameworks that can be adopted across the industry. This will help reduce inconsistencies in reporting practices and facilitate better communication of ESG performance.
- Promote transparency: Share ESG data and insights with stakeholders, including clients, regulators, and the public. Transparency in ESG reporting can help build trust and credibility, which is essential for attracting and retaining clients who value sustainable investments.
The rapid evolution of the ESG landscape presents both challenges and opportunities for investment managers. By prioritizing data collection, standardization, and transparency, investment managers can better navigate the ESG reporting landscape and meet the growing expectations of clients, regulators, and society at large. Embracing these changes will help investment managers contribute to a more sustainable and responsible future for the financial industry.
