Active Ownership, Growing Materiality & Data Demand Drive ESG Implementation for Asset Owners
The global quantitative survey, conducted by Morningstar Indexes and Morningstar Sustainalytics, included 500 asset owners (AOs) across 11 countries in
ESG Materiality – The Compounding Effect.
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More than two-thirds of AOs surveyed (67%) say ESG has become more material in the past year, with an average of 42% of AUM incorporating ESG factors, a four percentage point increase since 2022.
Europe is the major driver, increasing from 36% in 2022 to 45% in 2024. - While climate is still king and continues to grow (+12 percentage points in the last year), ESG has moved beyond just “E” in the eyes of AOs, with significant materiality increases for Social (+20 percentage points) and Governance (+12 percentage points).
- Climate transition readiness remains the most material Environmental factor, with labor practices and business ethics headlining material concerns for Social and Governance, respectively.
Fiduciary Duty – Driven by Financial Factors, Influenced by ESG Considerations.
- Financial considerations outweigh societal implications for AOs, with 72% considering single materiality relevant as compared to 59% for double materiality. As AUM increases, the percentage selecting “very relevant” for double materiality increases, suggesting that larger AOs view themselves more as universal owners & are more likely to consider the broader impact of their investments on the world.
- More than half of AOs (53%) feel ESG considerations go hand-in-hand with the fulfillment of fiduciary obligations.
- When it comes to incorporating ESG considerations, nearly eight in 10 (78%) view active ownership as useful in driving the implementation of their ESG programs. The general consensus is that proxy voting is the least effective method of active ownership, while direct engagement with companies ranked as the most important and effective tactic across all regions.
ESG Market Maturity Brings a More Focused Set of ESG Data Demands.
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When asked to choose whether ESG data, ratings or indexes are the most valuable component for implementing an ESG strategy, 43% selected ESG data, as compared to 24% selecting ESG ratings and 23% selecting indexes as most valuable. One of two AOs surveyed in the
UK (50%),Germany (52%) andChina (50%) selected data as the most useful tool for ESG implementation. - While an increasing percentage of AOs surveyed believe ESG ratings, data and indexes have improved over the last five years, they are still looking for increased accuracy and more standardized, relevant reporting (cited as a barrier over the past two years). AOs hold a range of key stakeholders such as ratings agencies, regulators and index providers accountable for driving improvements.
- AOs are excited about the potential impact of artificial intelligence, or AI, on ESG data provision, with more than seven in ten hoping AI adoption will increase in the next five years to help drive innovation in data collection, ESG analysis, ESG reporting, portfolio construction & index creation.
“As stewards of influential pools of global capital, asset owners take their fiduciary duties very seriously, and our survey findings underscore that,” said
About Morningstar Indexes and Morningstar Sustainalytics
Morningstar Indexes and Morningstar Sustainalytics are aligned to provide a more holistic and robust ESG offering to Morningstar clients. This growing collaboration includes ESG-related products, insights and research.
As the fastest-growing global index provider for the last three years according to
Morningstar Sustainalytics is a leading ESG data, research, and ratings firm that supports investors around the world with the development and implementation of responsible investment strategies. For more than 30 years, the firm has been at the forefront of developing high-quality, innovative solutions to meet the evolving needs of global investors. Today, Morningstar Sustainalytics works with hundreds of the world's leading asset managers and pension funds who incorporate ESG information and assessments into their investment processes. The firm also works with hundreds of companies and their financial intermediaries to help them consider material sustainability factors in policies, practices, and capital projects. Morningstar Sustainalytics has analysts around the world with varied multidisciplinary expertise across more than 40 industry groups. For more information, visit www.sustainalytics.com.
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Source: Morningstar, Inc.