The vast majority of senior investors and business leaders plan to increase ESG investments over the next five years, with each group expecting a range of benefits from greater ESG focus, including 90% of investors expecting higher returns, and executives see better access to capital and corporate reputation, according to a new survey from Bloomberg Intelligence (BI).
For the report, BI’s inaugural ESG Market Navigator, Bloomberg surveyed 250 C-suite executives across a broad range of industries, and 250 senior investors, including asset managers, asset managers and investment banks, in North America, Europe and Asia Pacific.
One of the report’s key findings was that the trend of increasing attention to ESG by both companies and investors appears to remain intact in recent years, despite several negative headlines. About three-quarters of executives report that the benefits of ESG are worth it. the increased risk of greenwashing research, and more than half of investors say that political pressure on ESG in the US has actually led them to focus more on ESG than ever, with a further 31% reporting that this has not influenced their ESG strategy. A large majority of both groups, including 90% of investors and 67% of executives, recognized that ESG has gone mainstream.
The groups differed significantly in their ranking of long-term ESG benefits: 63% of investors cited profit and returns as one of the three most important benefits, the most cited of all factors, compared to just 32% of executives who ranked brand equity selected. usually at 66%.
Of investors, 86% reported that they view ESG as part of their fiduciary duty, 90% said ESG investing is expected to deliver better returns, while 92% said ESG supports a more resilient portfolio strategy, and 89% reported that ESG analysis supports better informed decisions. Accordingly, most investors plan to expand their investments in this area, with 86% and 88% planning to expand their assets under management into ESG and climate respectively over the next two years, and 25% reporting that they are expect an allocation of more than 30% to ESG in 5 years, compared to 6% who expect this allocation within 1 year.
Similarly, 85% of investors report plans to increase their ESG research budgets over the next two years, including nearly one in four planning to do so by more than 20%.
Investors also report that they have become more active in engaging companies on ESG issues, with more than 60% reporting they are challenging companies on ESG strategy, and 84% saying they see a greater focus on ESG at the calls of investors.
Executives similarly reported plans for near-term growth in ESG investments, with 77% expecting an increased ESG budget over the next two years, while 23% expect an increase of more than 20%. Executives surveyed cited a wide range of benefits to ESG: 84% say it helps shape a more robust business strategy, 81% say they worry about losing market share if they fall behind on ESG, and 76% say an ESG strategy improves access to capital.
Additionally, 84% of executives reported that they have incorporated ESG and climate factors into their business planning and ESG strategies, and while 57% said they expect to meet their net zero targets, only 33% of their peers expect them to do so .
One of the key trends cited by both groups for the coming year is the impact of AI on ESG, especially as a resource for addressing data issues that hinder investor and corporate ESG initiatives. More than 90% of executives and investors agreed that “AI is a friend of ESG,” with the most commonly cited benefits including better data estimation, improved supply chain traceability and the ability to detect controversies.
Adeline Diab, Global ESG Research and Strategy Director at Bloomberg Intelligence, said:
“ESG has gone from a marginal issue to mainstream and ultimately to a mandatory necessity. We expect 2024 to be all about ESG accountability and ushering in an era where dialogue between investors and companies will be critical. 60% of investors hold companies accountable on ESG, while 40% of managers face ESG questions on more than half of their investor calls. I am confident that critical research will help shape a more credible ESG market over time.”