Russell Investments’ sixth-annual ESG survey

Russell Investments’ sixth-annual ESG survey: Nearly 80% of asset managers globally incorporate ESG factor assessments in their investment process

Majority of NZ & AU firms measure and manage material climate-related risk in portfolios

Auckland, October 21, 2020 — Increasing numbers of investment firms are incorporating additional environmental, social and governance (ESG) metrics into their investment processes, while also expanding the amount of resources dedicated to responsible investment, according to a new global survey of asset managers.

Russell Investments’ sixth-annual ESG Manager Survey reveals the practices and views of 400 asset managers globally across a broad range of asset classes (including equity, fixed income, real assets and private markets) to assess attitudes toward responsible investing and how firms are integrating ESG factors into their investment processes.

The survey, conducted by the firm’s manager-research team, finds that asset managers are increasing the extent to which they incorporate ESG-specific considerations into their investment activities. 78% of managers surveyed globally now explicitly incorporate qualitative or quantitative ESG factor assessments into their investment processes. This reflects an increase of five percentage points compared to last year’s survey.

“Our comprehensive ESG survey shows the investment industry is increasing its support for sustainability-related initiatives and improvements around reporting practices,” said Alister Van der Maas, Managing Director, New Zealand at Russell Investments. “We’re encouraged the survey shows a growing number of asset managers agree with our long-held view that respects ESG as an essential consideration to incorporate into investment decision-making processes.”

Governance remains the critical consideration for asset managers, with 82% of respondents identifying this as the ESG factor with the most impact on their investment decisions. However, environmental and social issues are becoming more pronounced in asset managers’ thinking, with this year’s survey showing a 4% increase in the number of managers identifying environmental considerations, particularly climate change, as the factor that most impacts their investment decisions.

The survey reveals asset owners are increasingly linking their portfolios to climate change. For example, 61% of respondents in Australia and New Zealand report they have a firm-wide effort in place to measure and manage material climate-related risk in their portfolios. While that percentage trails Continental Europe (75%), it’s significantly higher than Asia ex-Japan (33%), Japan (44%), the U.S. (31%), the UK (48%) and Canada (26%).

Regarding the Task Force on Climate-Related Financial Disclosures (TCFD), only 29% of the survey’s respondents say they share the TCFD disclosure to an external audience. Interestingly, most of the TCFD supporters are firms with asset size greater than US$100 billion, pointing toward the resource-intense nature in providing climate risk measures.

Overall, the survey shows that the fund management industry continues to embrace ESG integration, even amid pandemic-related challenges and volatility, but asset managers seek better ESG information, deeper resources, broader consideration within investment processes and clearer regulatory standards. Asset managers also seek greater clarity of the value-add from explicit ESG integration.

Russell Investments, which integrates ESG in its manager research practice and uses the ESG survey results to help inform manager strategy evaluations, was recognised as a leader in responsible investment by the Responsible Investment Association Australasia (RIAA) as part of RIAA’s 2020 annual benchmark report.

The Russell Investments 2020 ESG Manager Survey findings can be obtained here.

About Russell Investments

Russell Investments is a leading global investment firm providing tailored solutions and services to institutions and individuals through financial intermediaries. Russell Investments is dedicated to improving people’s financial security, leveraging an 84-year client-centric heritage rooted in investment innovation. Russell Investments is the fourth-largest adviser in the world with NZ$450 billion in assets under management (as of 6/30/2020) and NZ$3.9 trillion in assets under advisement (as of 12/31/2019) for clients in 32 countries. Headquartered in Seattle, Washington, Russell Investments operates through 18 additional offices in major financial centers such as New York, London, Tokyo and Shanghai.

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