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Unique factors shape Australian institutional investment ESG boom

By Michael Karpathios
 — 1 minute read

ESG investment is said to become even more integral to investment strategies with almost 80 per cent of institutional investors expected to make the movement central to their portfolios in the coming years, according to a new survey.

The BNP Paribas ESG Global Survey 2021 analysed asset owners, official institutions and asset managers, finding that 50 per cent of respondents currently see ESG as integral to their investment strategies.

The survey predicted that this number will jump to 79 per cent in two years.

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It was found that Australian investors, while mirroring the global trend towards ESG adoption, tended to have different reasons and methods for doing so when compared to counterparts across APAC.

In China and Singapore, reputation was the strongest driver for ESG integration. However, this was only the fourth-most important factor for Australian institutions – with 32 per cent of respondents citing this as key.

The most important factor in ESG adoption for Australian institutions was external stakeholder requirements, noted by 68 per cent as critical, reflecting the demand for ESG investment seen across the wider Australian investment landscape.

Furthermore, it was found that while equities topped the list of asset class preferences for ESG adoption with 68 per cent (the global figure was 69 per cent), Australian institutions had a greater preference for ETF tracker funds (29 per cent) and ETF thematics (32 per cent) when compared to regional and global peers.

VanEck recently revealed the popularity that ETFs have seen in Australia is closely tied to their ability to engage with themes like ESG.

“The diversity of the APAC region is reflected in the results of this year’s survey, but what is clear is that change is happening swiftly, with ESG playing a rapidly increasing role in investment decisions,” said Nadim Jouhid, head of investment solutions at BNP Paribas Securities Services Asia Pacific.

Despite the positivity garnered from the report, barriers to further adoption would need to be met before the predicted growth could occur.

In Australia 71 per cent of respondents said that inconsistent data quality between asset classes was a top-five hindrance.

Furthermore, when compared to peers in APAC, as well as globally, Australian institutions found a lack of backing from senior leadership to be a significant barrier, with 39 per cent of respondents reporting this to be the case.

The same was only true for 30 per cent of respondents in the rest of APAC and 22 per cent of global respondents (excluding Australia).

 

Unique factors shape Australian institutional investment ESG boom
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