Institutional investors are expected to double their investment in environment, social and governance (ESG) driven strategies over the next two years.
A survey from BNP Paribas Securities Services revealed 77% of asset owners currently incorporate ESG, although nearly half of those surveyed have 25% or less invested in specific ESG strategies.
However, the study showed that asset owners plan to increase this to 50% or more over the next two years.
Similarly, the survey found 80% of asset managers currently incorporate ESG strategies, but 40% of those currently market 25% of less of their funds as ESG.
Again, this is set to increase with 54% of asset managers stating they are planning to market 50% of more of their funds as ESG over the next two years.
Sid Newby, head of asset manager and asset owner sales at BNP Paribas Securities Services, explained the next two years will see a huge shift in the way investments are selected.
“It is widely accepted that incorporating ESG can be beneficial to returns, but what we will see now is firms really putting investment weight behind this,” he said.
Newby added, however, there are challenges as obtaining and analysing ESG data requires new tools, resources and skills for both asset owners and managers.
The survey found 64% of asset owners and 47% of asset managers are concerned about the lack of robust data when looking to adopt ESG strategies.