While Republican lawmakers in the US are trying to wipe ESG off the map, most global investors and executives are acting as if those efforts will ultimately fail.
Using environmental, social and governance metrics is now mainstream, according to 89% of investors who responded to a survey released Wednesday by Bloomberg Intelligence. And 57% said the “ESG” label should not be replaced with something less inflammatory, despite the backlash.
ESG is primarily used to “improve profitability, competitiveness and brand value”, according to Bloomberg Intelligence, whose full survey findings are based on responses from 250 C-suite executives and 250 senior investors distributed equally across the US, Europe and Asia. Pacific region.
Overall, the survey found that 85% of investors believe that ESG leads to “better returns, resilient portfolios and enhanced fundamental analysis.” Among executives surveyed, 84% said ESG helps them “form a more robust corporate strategy,” according to Adeline Diab, BI’s director of ESG strategy and research.
The findings come as ESG fund flows have shown signs of cooling, against a backdrop of continued political attacks and disappointing returns. This year, investors in wind and solar stocks have seen their investments sink as higher interest rates and supply chain sectors hit the renewable energy sector.
Meanwhile, laws seeking to ban ESG are spreading across GOP-led states in the US. The development has drawn warnings from some of the biggest names on Wall Street, as banks and investment managers come under fire for policies seen as unfriendly to the gun and fossil fuel industries. . This month, the head of JPMorgan Chase & Co. Jamie Dimon has warned that Texas risks undermining its business-friendly reputation with its anti-ESG laws.
In the United States, investors pulled $2.7 billion from sustainable funds in the third quarter, and fewer new sustainable funds were started than at any time in the past three years, according to data provided by Morningstar Inc. In Europe, meanwhile, ESG funds have proven resilient. .
At the same time, some of the largest investment firms are expanding their ESG business. BlackRock Inc., the world’s largest asset manager, said last month that its sustainable long-term flows have been positive every quarter since the start of 2022. BlackRock now manages nearly $700 billion of sustainable strategies on behalf of clients, more than $200 billion USD in 2020.
A key finding of the Bloomberg Intelligence survey was the role played by ESG regulations and legislation in driving corporate strategies and capital flows. “Global regulation anchors ESG in financial markets and corporate strategy, yet challenges include data consistency and fund labeling for investors, and transition costs and supply chain risk for companies,” said Diab.
Among investors surveyed, 86% view ESG as part of their fiduciary duty and 90% expect ESG investments to deliver better returns over a 12-month period. Additionally, 88% of senior investors surveyed said they will expand their assets under management to climate-friendly strategies over the next two years.
The survey findings revealed some differences in how investors and corporate executives view ESG, depending on the time horizon. In the short term, respondents said “geopolitical risks can hinder ESG plans,” Diab said. “However, long-term commitments are intact.”