Barriers to ESG in the Asset Management industry

While there has been a significant increase in interest in Environmental, Social, and Governance (ESG) considerations in the asset management industry, there are still some barriers to widespread adoption of ESG principles. It must be stressed that a key factor in breaking down the barriers to ESG is the continuous evolution of the regulation globally, in terms of both disclosure and risk management. With this in mind, the main barriers include:

Data quality and availability: One of the main challenges for asset managers is accessing high-quality, reliable, and standardised ESG data. Without consistent and reliable data, it can be difficult for asset managers to accurately assess the ESG performance of companies and make informed investment decisions.
Lack of standardisation: The lack of standardised ESG reporting frameworks makes it difficult for asset managers to compare ESG performance across different companies and industries. This can result in inconsistent ESG assessments and lead to challenges in making meaningful ESG comparisons.
Conflicting definitions: There is no standard definition of what constitutes ESG, and different stakeholders often have different interpretations of what it means. This can create confusion and inconsistency in ESG assessments and make it difficult for asset managers to effectively integrate ESG principles into their investment strategies.

The Limited ESG product availability relative to traditional investment products is a side effect of these data challenges. This can make it difficult for investors who are interested in ESG to find suitable investment opportunities. Asset Managers that can overcome these barriers can better integrate ESG considerations into investment decision-making, leading to improved sustainability outcomes and better long-term performance for investors.

Talk to us to learn from our experience of handling ESG data challenges to build viable ESG Products.