Institutional investors plan to double investment in environmental, social and governance (ESG) driven strategies over the next two years, according to research by BNP Paribas.
The survey, “ESG – What’s next for asset owners and managers”, found that 79% of institutional investors currently incorporate ESG into their business plans either in how they invest as asset owners or in terms of the products they market as asset managers.
The survey also found that investment in ESG alternative assets is set to increase 20% in coming years.
However, 55% of respondents said that lack of robust data is a barrier to further ESG adoption and 31% of asset managers are worried about mounting costs related to ESG implementation.
Of the 77% of asset owners that currently incorporate ESG strategies, the survey found nearly half have 25% or less invested in specific ESG strategies but plan to increase this to 50% or more over the next two years.
Similarly, of the 80% of asset managers that incorporate ESG strategies, 40% currently market 25% or less of their funds as either ESG or responsible investing funds.
But this figure is set to climb over the next two years, with more than half (54%) planning to market 50% or more of their funds as ESG products in two years.
Sid Newby, head of asset manager and asset owner sales at BNP Paribas Securities Services, said: “There is set to be a huge shift in the way investments are selected over the next two years.
“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.”
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