Despite growing interest in socially responsible investing, data remains a significant problem for investors, according to a new survey.
A poll of institutional and high-net-worth (HNW) investors and their advisors, conducted by Federated Hermes, found that almost three quarters – 71% – were concerned about the “quality of data and measurement” from companies in their investment portfolios.
This was despite a significant proportion of investors reporting that they were integrating environmental, social and governance (ESG) factors into their investment processes. Others said they were making exclusion or inclusion decision based on ESG metrics or data.
Companies’ transparency regarding ESG risks and data, as well as their commitment to sustainability goals and principles, was seen as of high importance to more than 80% of respondents.
Among the more than 200 financial advisors and wealth managers surveyed by Federated Hermes, two thirds (67%) said they already took responsible investment factors into account when making recommendations, while a further 25% were considering doing so.
Almost every advisor – 95% of them – reported that clients had asked them about ESG factors when discussing investments. This had increased substantially since the onset of the Covid-19 pandemic.
One advisor told the survey: “A couple of months ago, the Exxon situation with the activist investor was a perfect example where we, at one time, owned Exxon. That stimulated conversation with clients saying, ‘Well, have you thought about oil and gas and the future of it in the context of ESG?’ So that's how a lot of these things sort of happen.”
This was reflected in the HNW data: of the 100 such investors polled, 59% said an advisor had recommended that they factor in ESG concerns when making investment decisions.
“ESG is increasingly important for investment professionals as their clients, boards and investment committees are asking for more insights and options,” said Anne Kruczek, head of Federated Hermes’ responsible investing office.
“Evolving investor viewpoints highlight the continued importance of monitoring ESG-related considerations and their potential impact on investment opportunities and risks.”