LONDON, Aug. 3, 2020 -- Over 90% of global public investors have specific ESG (environment, social and governance) investment policies in place or are in the process of developing them, according to a new survey from BNY Mellon and the Official Monetary and Financial Institutions Forum (OMFIF).
In supporting the post-pandemic recovery, global public investors will have a chance to build on the momentum of the sustainability agenda of recent years. They are also motivated to adopt ESG criteria by the potential for superior risk-adjusted returns.
However, they still face significant barriers in scaling up these efforts, including insufficient data and the difficulty of measuring the impact and non-financial performance of their ESG investment strategies.
The findings, also published in OMFIF’s latest Global Public Investor Report, are based on responses from two surveys conducted over the past year, the OMFIF GPI Survey 2020 and the OMFIF ESG integration survey. The first was conducted between March and June of this year, and reflects the responses of 50 central banks, 11 sovereign funds and 17 pension funds with combined assets under management of $7.2tn. The second, more in depth survey included 25 questions on ESG investment and was conducted jointly with BNY Mellon between August-November 2019. It reflects the responses of 27 sovereign and pension funds with a combined asset under management of $4.72tn.
Highlights from the two surveys include:
Data, complexity and existing mandates are top ESG barriers
Appetite for ESG precision growing
ESG methods and sustainable asset allocations
Frances Barney, Head of Global Risk Solutions at BNY Mellon Asset Services, said: “ESG remains high on the agenda for the majority of global public investors. As some of the world’s largest investors, their approach to sustainability has a significant influence across the global investment industry and beyond that into the wider economy and society. Conversations we are having with clients suggest that the Covid-19 pandemic has sharpened their attention on the non-financial sources of risk. The pandemic is also shifting the focus of ESG risks to concerns such as biodiversity, environmental loss, health and social issues.
“Accessing and analysing complex data from multiple sources continues to be a barrier to investors in further integrating their ESG strategies. Technology is the solution – with technologies being developed that enable investors to measure the non-financial performance of investments and help perform investment manager due diligence and inform conversations with stakeholders.
“Our survey suggests that strong interest from global public investors in green bonds will continue, highlighting the need to solve current bottlenecks in the market. The solution is most likely to come via advanced technology-based ecosystems to deal with information asymmetry and trust issues, thereby helping investors and issuers make informed ‘green’ investment choices, and efficiently raise capital for credible green projects.”
Danae Kyriakopoulou, Chief Economist and Director of Research at OMFIF, said: “The pandemic has exposed the vulnerability of financial systems to non-financial global risks. Sustainability will be a key guiding theme as policy moves from ‘life support’ to ‘designing the recovery’. With assets of $39.5tn, global public investors have an active role to play in ensuring the recovery is sustainable. But as this report illustrates, they still face barriers related to data, measurement and resources to scale up their sustainable investment practices.”
BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries. As of June 30, 2020, BNY Mellon had $37.3 trillion in assets under custody and/or administration, and $2.0 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com. Follow us on Twitter @BNYMellon or visit our newsroom at www.bnymellon.com/newsroom for the latest company news.
The Official Monetary and Financial Institutions Forum (www.omfif.org) is an independent platform for dialogue on world finance and economic policy. It serves as a non-lobbying network for worldwide public-private sector interaction in finance and economics. The aim is to promote exchanges of information and best practice in an atmosphere of mutual trust. OMFIF focuses on global policy and investment themes – particularly in asset management, capital markets and financial supervision/regulation – relating to central banks, sovereign funds, pension funds, regulators and treasuries.