Challenges AM's are facing with ESG integration - especially when blending green investment decisions with returns to investors. (2024)

The ESG landscape in asset management faces several challenges that need to be addressed to ensure sustainable investment practices. Some of the significant challenges include:

Data quality and availability: One of the most significant challenges in the ESG landscape is the lack of standardised, reliable, and comparable ESG data across different companies and industries. AM's need high-quality data to make informed investment decisions.

1. Integration of ESG considerations: AM's face challenges in integrating ESG considerations into their investment strategies, particularly in traditional asset classes such as equities and fixed income.
2. Lack of clarity on ESG definitions and frameworks: The lack of clarity on ESG definitions and frameworks makes it challenging for asset managers to assess and compare the ESG performance of different companies and industries.
3. Limited availability of ESG investment products: Although the demand for ESG investment products is increasing, there is still a limited availability of these products in the market. This limits the options for asset managers to invest in sustainable assets - particularly when they're striving to maximise returns for investors, whilst aligning to their green investment commitments.
4. Cost and resource constraints: Implementing ESG considerations into investment processes can be costly and resource-intensive. Small and mid-sized asset managers may not have the necessary resources to integrate ESG into their investment processes. Thankfully, most are considering ESG as an integral part of their strategy, so we are seeing a fairly widespread commitment.
5. Lack of ESG expertise: Some AM's may lack the necessary ESG expertise to effectively integrate ESG considerations into their investment strategies, which is where Healy Hunt can help!

To overcome these challenges, asset managers need to collaborate with other stakeholders, including regulators, companies, and data providers, to promote ESG transparency and improve the availability of high-quality ESG data. They also need to invest in ESG expertise, technology, and research to integrate ESG considerations into their investment strategies effectively.

Feel free to send me a note at tom.dagwell@healyhunt.com, and we can schedule some time to chat about how we can help.