ESG reporting is 'biggest challenge' for investment managers

Challenges, ESG, reportingRussell Investments' latest ESG survey indicated that data limitations and non-standardised reporting frameworks constitute the biggest challenges for investment managers.

The eighth annual 'ESG Manager Survey' found that less than 30% of firms out of 236 can report on their respective portfolios' carbon-related metrics.

The survey findings disclosed that ESG reporting remains the most significant challenge despite increased expectations of adequate reporting, the firm said.

The study showed that 41% of respondents expressed they have ESG-related data for developed market sovereign bonds, while 27% have some scientific-based carbon data in this segment.

While for fixed-income firms, 20% have some form of ESG-related data in the securitised bond market, and "only" 8% have some form of carbon data in the respective segment.

Yoshie Phillips, head of fixed-income ESG investing at Russell Investments, said, "The results highlight further improvements are still needed around ESG data. In the corporate bonds space, there are still several challenges such as disclosure practices in privately held companies or applying carbon measures in green bonds."

Phillips further commented that outside of corporate issuers, ESG-related reporting continues to develop in an "unstructured fashion" due to the lack of unambiguous industry standards.

The survey revealed that asset managers are increasingly interested in energy transition as 26% of the respondents are signatories to the Net Zero Asset Managers initiatives, up from 10% in 2021.

Respondents of the survey identified climate risk as the most prevalent ESG issue among their clients (45%), up from 39% last year. At the same time, climate change/environmental issues stood as the top ESG concern for 68% of respondents' clients.

Findings show investors are more broadly focused on climate and environmental issues, and other ESG issues resonate less strongly, the asset manager claimed.

"This year's results reveal that the ESG journey is continuing at a markedly escalated pace, with regulators across the globe aggressively stepping in to try defining sustainable investing and to increase disclosure requirements, and asset managers trying to keep up," said Phillips.

Russell Investments' 2022 ESG Manager Survey was conducted across equity, fixed income, real assets and private markets asset managers around the globe.

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