Over two thirds (68%) of institutional investors cited difficulty measuring impact as the primary challenge to further the adoption of sustainable investing.
This is according to research from Fidelity International’s Professional Investor DNA Survey, which also found that 52% of investors mentioned regulatory changes or inconsistent regulations was a key barrier.
Additionally, in Asia, 66% of investors felt the lack of supply of quality strategies and products was a barrier, compared to only 31% in Europe.
However, Fidelity also found that during the next 18 months, over half of institutional investors are still considering environmental, social and governance (ESG) factors important when it comes to portfolio asset allocation.
The survey also found that ‘E’ was the top consideration, with 63% of investors citing it as the most important factor.
This was followed by 58% saying governance was the most important factor and 51% for social.
European investors placed the most emphasis on ESG criteria in portfolio asset allocation.
The study also revealed further investor focus on environmental considerations, such as decarbonisation and the energy transition alongside the preservation of natural capital ranked in the top three themes in focus.
Fidelity said this is “likely driven by ongoing investor and policy maker commitments to reach net zero carbon emission goals”.
In order to create positive impacts while investing, 59% said to focus on impact investment, adopt exclusionary screening (52%), individual company engagement (44%) and government policy & regulation (44%).
The investment manager said this “highlighting the multifactor approach needed when it comes to driving change”.
Fidelity International chief sustainability officer Jenn-Hui Tan said: “Our study shows ESG remains firmly on investors’ minds. While ESG investing may now be viewed as a mainstream consideration in asset allocation, further progress is needed to break down implementation barriers.
“This includes difficultly measuring impact, with observations pointing to difficulties sourcing and analysing good quality company data, and navigating regulation, where discrepancies remain across national, European and global regulatory frameworks.
“We continue to support increased data transparency and standardisation, and the harmonisation of global regulatory regimes that enable decision-useful disclosure. We also champion greater focus on policies driving real-world outcomes, complementing the role of enhanced disclosures in guiding investor choices.
“In Asia, our study finds that product availability continues to lag in Europe. A key area of focus in Asia is transition finance, which is being supported by national level transition plans, as well as innovative frameworks and product structures. We expect this will trigger greater product innovation, which responds to growing client demand.”
In order to obtain these results, Fidelity commissioned Coalition Greenwich to conduct a study on future investment trends among 125 institutional investors and intermediary distributors in selected countries in Europe and Asia in November 2024.
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