FTSE Russell, a global index provider, has published results of its 2023 global asset owner survey, an annual study analysing how sustainable investment (SI) is perceived, considered, and used by asset owners across the world.
A new 2023 global asset owner survey by FTSE Russell shows that 90 per cent of asset owners in the Asia-Pacific region have implemented or evaluated sustainable investment in their investment strategies in 2023, dropping slightly from 97 per cent last year. This is in line with a global directional dip to 80 per cent this year, from 88 per cent in 2022.
Globally, client demand continues to drive motivation for implementing or considering SI – a trend defied by the Asia-Pacific region, the survey reveals. It shows that 52 per cent of asset owners globally cited client demand this year, an increase from 42 per cent last year. In Asia-Pacific, this number slid from 45 per cent last year to 29 per cent this year.
Satisfaction with the ability to deliver investment outcomes while implementing SI has also dropped in Asia-Pacific from 79 per cent last year to 49 per cent this year. This is in line with a global dip in satisfaction from 63 per cent in 2022 to 58 per cent in 2023.
Fixed income remains the top asset class for SI allocations in APAC at 66 per cent, higher than the global average of 45 per cent, the survey shows. This is followed by infrastructure (44 per cent) and private real estate (43 per cent). Among fixed income asset classes, sovereigns topped the asset classes in which sustainability considerations have been implemented for the Asia-Pacific region, in contrast to the global preference for credit/corporate returns.
Similar to last year, separately managed accounts remain the preferred investment vehicle for Asia-Pacific asset owners to accomplish SI goals, but to a lesser extent, the firm continued.
In terms of sustainability, governance (53 per cent) is the top priority focus for asset owners in Asia-Pacific. This is followed by social themes (43 per cent) and climate/carbon (34 per cent). Both social themes and broader environmental considerations (25 per cent) reflected a significant decline from last year, which were 76 per cent and 72 per cent respectively in 2022, the survey reveals.
The biggest challenge faced by Asia-Pacific asset owners when trying to meet regulatory requirements is an inability to align their portfolio with SI, cited by 52 per cent of respondents, the firm said.
Despite this, asset owners in Asia-Pacific find that recent regulatory developments around SI to be greatly beneficial for them. Two in three asset owners found the consolidation of ESG reporting standards bodies would be helpful to investors, as well as development of sustainable finance, green taxonomies and investor disclosures for SI strategies and outcomes, the survey shows.
“While we see that SI in the Asia-Pacific region has dipped in line with global trends, the number of asset owners who continue to focus on SI in their strategies remains high,” Tony Campos, head of Sustainable Investment, Index Investments Group at FTSE Russell, said.
“We are seeing more awareness from asset owners on the importance of including SI, as well as more in-depth feedback around the barriers that they face in adoption. The views expressed by asset owners reflect a need for the industry to clearly define ESG parameters for both asset owners and investors alike to better understand SI,” he continued.
“Our research demonstrates the continual evolution of SI among asset owners and the differing priorities across the globe,” Sylvain Château, global head of Product, Sustainable Finance and Investment at LSEG, added.
“While the long-term trend for SI reflects a very positive trajectory, macroeconomic and geopolitical factors have influenced respondents’ short-term sentiment. Additionally, accessing the right data and choosing effective data partners can help to alleviate concerns around gaps in data and poor data quality. But as sustainable investment strategies continue to mature and a focus on governance grows, the quest for the right data is likely to become an even greater priority for asset owners,” Château said.