Of the asset managers and asset owners surveyed by BNP Paribas Securities Services, 27% said they thought costs would be a significant barrier to incorporating investments that consider the environmental, social and governance (ESG) side within two years.
A further 28% of asset managers admitted they were concerned they didn’t have the ability to meet the demand for ESG investments from clients currently, and worried they wouldn’t in the future.
The research report, titled ‘Great Expectations: ESG – What’s next for asset owners and managers’, also found more than half (55%) of those surveyed felt the lack of robust data on ESG investments was the biggest barrier to its adoption in strategies.
Nearly a quarter thought the lack of advanced tools, including expertise in staff, would become increasingly problematic in the next two years.
With more resources needed and better quality data required, the respondents also expected costs to rise.
Sid Newby, head of asset manager and asset owner sales at BNP Paribas, said firms will need to put investment weight behind ESG if it was to be successful.
He added: “There is set to be a huge shift in the way investments are selected over the next two years.
“However, there are challenges. Obtaining and analysing ESG data will require new tools, resources and skills for both asset managers and owners and so we expect technology to play an extremely important role in helping them meet their goals.”
Despite some pessimism over costs and resources, of the 79% of respondents who already incorporated ESG into their portfolios, half planned to ensure that more than 50% of the portfolio was classed as ESG within the next two years.
However, of the 461 respondents, a fifth (21%) said they did not currently incorporate any ESG into their investment process.
Of that 21%, nearly half insisted they were unlikely to consider adopting ESG into their investments with 38% complaining of the difficulty of defining what an ESG investment is.
