Lack of Comparable Data a Major Hindrance to ESG Investing – HSBC

Covid-19 pandemic bolstered investors’ and issuers’ commitment to sustainability.

Data provided by issuers is not comparable enough to support ESG-driven investing, according to half of investors surveyed for a global study released recently by HSBC. The bank’s ‘Sustainable Financing and Investing Survey 2020’ found investors in the Americas (56%), the Middle East (55%) and France (58%) most likely to cite lack of comparable data as a barrier.

Investors also complained about the quality and availability of ESG data provided by companies. The dissatisfaction is especially pronounced in the Middle East, with 36% of investors in the region saying they feel obstructed, rising to 40% in Saudi Arabia. A total of 37% of all investors surveyed said they needed more advice on techniques to help them use ESG data more effectively.

Overall, however, obstacles to ESG investing seem to be shrinking. Compared to 61% last year, less than half (46%) of investors feel held back by obstacles in ESG investing. Just over a third (34%) in Europe and a little over a quarter (28%) in the UK feel hindered. However, 69% of Middle Eastern investors said they experience obstacles to their ESG investing, with 51% saying so in the Americas, and 56% in Canada.

Inconsistency in ESG definitions are a particular worry among European investors, with 39% considering it an obstacle, and 58% French institutions claiming to be obstructed by it.

Apart from these factors, investors reported three other main obstacles – performance, demand and expertise. Globally, 39% of investors are put off by a fear that ESG investing may offer relatively poor financial returns, while 35% point to lack of demand from asset owners and 30% to a shortage of expertise or qualified staff.

Despite these obstacles, many interviewees said the pandemic had strengthened their commitment to consider ESG issues. Almost three in ten investors and more than four in ten issuers said they now believe even more strongly in the need to become sustainable.

Over half of investors (51%) said they have already adopted firm-wide policies on responsible investing, with 35% disclosing the ESG characteristics of their whole portfolios, up from 24% in 2019. A total of 94% of issuers disclose aspects of their environmental and social performance.

Investment opportunities in sustainable infrastructure are increasingly seen as a priority, according to the report. Energy technologies such as renewable power, electric transport, waste water systems are attracting the interest of issuers and investors alike.

“Despite the challenging global market conditions throughout 2020, the outlook for sustainable financing and investing appears to be extremely strong,” said Daniel Klier, global head of sustainable finance, HSBC. “As the market grows and evolves, we believe the incorporation of environmental, social and governance factors will continue to have an increasing impact on investors’ and issuers’ choices.”

HSBC surveyed 2000 market participants in the months of July and August, which consisted of 1000 investors and 1000 issuers from 34 countries.

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