Russell Investments has unveiled the findings from its ninth annual ESG Manager Survey, providing valuable insights into the ever-evolving realm of ESG practices in the investment management sector.

The results of this year's worldwide survey shed light on workforce trends that mirror the growing emphasis on sustainable investing, in sync with the prevailing momentum towards net-zero initiatives and the heightened reporting on ESG metrics and diversity. This extensive survey collected responses from 169 asset managers representing a staggering $20 trillion in assets under management.

Kris Tomasovic Nelson, Senior Director and Head of ESG Investment Management at Russell Investments, emphasised the industry's ongoing commitment to responsible investment practices.

He noted that active managers across various asset classes are increasingly integrating ESG considerations into their investment processes while actively recruiting for roles related to ESG. Nelson underscored the preeminent concern of investors in climate risk and forecasted ESG's further integration into the investment landscape.

The survey also uncovered a noteworthy shift, with active ownership emerging as the primary source of ESG information. This year, only 7% of respondents indicated that ESG factors do not influence their investment decisions, a significant decline from the 22% reported in 2022. This shift is indicative of the growing recognition that ESG issues, encompassing aspects like climate risk and labour relations, are financially material.

Key Highlights from Russell Investments' 2023 ESG Manager Survey:

• Dedicated ESG Hiring: A substantial 75% of participants added specialised ESG personnel in the past year across various functions, including ESG teams (23%), data integration and analytics (10%), stewardship (9%), and equity investment (7%). Compliance was frequently mentioned as a new role in the "other" category for ESG-related positions.
• Regulatory Momentum: There is an increasing demand for ESG-specific compliance due to heightened regulatory requirements, particularly in the UK and Europe.
• ESG Integration and Active Ownership: Active ownership has taken the lead as the primary source of ESG information. The survey revealed a significant shift, with only 7% stating that ESG factors do not influence their investment decisions, down from 22% in 2022.
• Factors Impacting Investment Decisions: ESG considerations, such as materiality for reducing security risk (26%), the potential to drive positive returns (19%), governance concerns (19%), climate risk (15%), and social risk (15%), play a prominent role in shaping investment choices.
• Increased ESG Metric Reporting: A notable 66% of managers reported ESG metrics for all funds, an increase from 59% in 2022. Carbon emissions (56%) were the top metric, followed by diversity statistics, which saw an uptick (24%, up from 19% in 2022).
• Net Zero Asset Managers Initiative (NZAMi): Among the survey respondents, 27% are current signatories, with 6% planning to join within a year. Adoption varies by region, with Europe (80%), the UK (58%), Japan (40%), and the US (20%). While most signatories currently manage a small portion of their assets in line with net-zero objectives, two-thirds aim to reach 50% or more by 2030. 13% already manage 80-100% of assets in alignment. U.S. managers are the only ones citing negative performance repercussions, reflecting ongoing debates on financial materiality in the country.

Kris Tomasovic Nelson noted, "Key challenges surrounding ESG integration persist, such as data availability, the absence of standardised corporate reporting, and the need to meet diverse client demands. Nevertheless, fewer managers are reporting that ESG considerations do not affect their investment decisions.

"Our annual survey signals a surge in commitments to responsible investment reporting frameworks and initiatives, and our research suggests that ESG has firmly entrenched itself as a lasting influence in the investment landscape."

Jihan Diolosa, Head of Global ESG Strategy at Russell Investments, added, "We recognise that the path to global ESG integration is not without its challenges, but our survey underscores the industry's move towards integration.

"It is now incumbent upon asset managers to translate their commitments into reality and ensure their engagement has the desired impact on industry practices."

For further details on Russell Investments' 2023 ESG Manager Survey, you can click here.

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Source: Russell Investments