Institutional investors embrace low-carbon transitions

A comprehensive study by BNP Paribas has unveiled an upward trajectory among institutional investors toward investments with discernible positive impacts and financial returns.

The ‘ESG Global Survey 2023’, conducted between April and July 2023 and drawing insights from 420 participants, including asset owners and managers, hedge funds and private equity firms, found a significant acceleration in low-carbon transition strategies.

Of the respondents, 41% marked net zero as their priority, a sharp increase from 18% in 2021. Impact investing, too, is gaining momentum. Over the next two years, 54% of the investors plan to embrace this approach, potentially making it the preeminent ESG method worldwide.

However, the road to ESG adoption isn’t without its bumps. As many as 71% of participants identified inconsistent ESG data as a principal barrier, a noticeable increase from 54% in 2021. In the realm of environmental goals, while 66% of investors acknowledge the urgency to address biodiversity loss and similar concerns, they also recognise that biodiversity data is still in its developmental stages.

Active ownership, where stakeholders actively engage in a company’s operations and decisions, is also gaining traction. Around 45% see it as a pivotal ESG goal for the near future. On the operational front, 51% are incorporating ESG expertise in portfolio management, reflecting a tangible shift in strategy and execution.

Regulatory and reputational factors are also commanding attention. A notable 60% have already assessed the financial nuances of ESG regulations, and 58% have weighed the potential reputational risks associated with their investments.

Sophie Devillers, head of sustainable finance, securities services, BNP Paribas, stated: “Our latest survey demonstrates that, since 2017, institutional investors have been transitioning from asking “why” integrate ESG to focusing on the “how” of implementation. They are now increasingly tackling the challenges of using ESG data, achieving their net zero objectives and integrating ESG expertise into their operations. The next two years will be critical for them to practically implement their ESG strategies.”

Delphine Queniart, head of sustainable finance client engagement, global markets, BNP Paribas, commented: “This survey shows that sustainable finance is rapidly maturing as investors look to mobilise across all different regions of the globe […] As this trend continues, investors will be better able to take advantage of developing opportunities and use their influence to move capital towards investments seeking measurable impacts.”

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