Confidence in reaching ESG Targets Low, Poll Shows

Investors are not confident in the ability of corporates and governments to hit their carbon emission reduction targets, according to a new investor poll.

Research by investment research group Procensus found that just 25% of the allocation professionals it surveyed felt that corporates would be able to hit their ‘net zero’ emission pledges by 2050.

Even fewer – 17% of respondents – believed the major oil companies would be able to successfully transition to become “big wind” or “big renewable” companies in the same timeframe.

Investors believed the major global economies of the US, Europe and China would “modestly accelerate the timetables for their net-zero commitments, although China is perceived as the least certain to do so”, reported Procensus.

A quarter of investors said they did not incorporate ‘net zero’ considerations into their decision-making processes yet, but Procensus argued that the fact these people participated in the research “indicates growing traction of this topic”.

Elsewhere in the survey, on top of climate change and environmental issues investors also highlighted diversity and inclusion themes and supply chain resilience as key issues for their investment strategies in 2021.

Alastair Walmsley, CEO of Procensus, said: “ESG investing is growing exponentially but little is known about what investors truly care about and how it is changing.

“Climate change, diversity and inclusion, and supply chain resiliency are the top three ESG themes for investors, most of whom will continue to increase the weighting of ESG in their investment strategies in 2021.

“However, the incorporation of ESG factors in the investment process by hedge fund managers lags institutional fund managers by a large margin. In addition, investor engagement with diversity considerations in the context of investment portfolios, across all fund managers, is significantly lower compared to climate change.”

Walmsley also highlighted data as one of the biggest “roadblocks” for investors. This included poor data disclosure by companies and inconsistent third-party scores and ratings.

“It will be fascinating to see the development in investor attitudes, and the relative importance of ESG factors, as investments in this space continue to see strong performance and an influx of flows,” he added.