58% believe that regulation plays a crucial role in removing barriers to SI adoption
FTSE Russell, a global index provider, has released its annual survey results, which explore the perceptions, considerations, and utilization of sustainable investing (SI) by asset owners worldwide. The findings reveal that, despite short-term fluctuations influenced by macroeconomic and geopolitical factors, Canadian asset owners maintain a positive long-term sentiment toward SI strategies.
“Despite challenging short-term macroeconomic and geopolitical factors causing a directional dip this year in terms of how global asset owners are evaluating and implementing their SI strategies, we found trends still suggest long-term growth,” said Tony Campos, head of sustainable investment, index investments group at FTSE Russell.
“This year’s survey highlights the long-term outlook for asset owners in Canada consistently implementing SI remains positive as we see regulatory requirements driving demand,” Campos said.
While the survey indicates a slight dip in the global implementation and evaluation of SI from 88% in 2022 to 80% in 2023, this trend is attributed to short-term factors like high interest rates aimed at combating inflation and geopolitical instability due to the conflict in Ukraine.
However, despite these influences, asset owners in Canada express unwavering conviction in SI, primarily driven by regulatory requirements (40%).
The importance of governance witnessed a rise across all regions, surging from 33% in 2022 to 54% among asset owners globally in 2023. In Canada, 47% of asset owners prioritize climate and carbon concerns, closely followed by governance at 46%.
Canadian asset owners largely view regulation as supportive of SI and environmental, social, and governance (ESG) goals, with 47% expressing strong agreement.
Furthermore, 58% of respondents believe that regulation plays a crucial role in removing barriers to SI adoption, and 50% see it as a means to enhance investor disclosures regarding SI strategies and outcomes.
An additional 32% believe that regulation contributes to improving the quality and consistency of corporate reporting and disclosures, while 23% think it provides valuable guidance on fiduciary and investor duty.
“We’re seeing a contrast in Canada compared to other countries where regulatory requirement is driving asset owners’ long-term conviction of adopting SI strategies within portfolios,” said Paul Bowes, Canada country head at FTSE Russell.
“Almost half of the survey respondents view regulation as helpful in meeting their SI goals, rather than a barrier. This is consistent with how independent Canadian pension boards have worked together with regulatory bodies to create one of the best run pension industries in the world,” Bowes added.
As SI continues to mature, asset owners acknowledge the successful prioritization of governance and climate/carbon-related strategies within their organizations. However, they also recognize complex challenges, including concerns about the availability and use of ESG data, with 57% of Canadian respondents expressing such worries.
Asset owners perceive the biggest barriers to regulatory compliance as the difficulty of aligning portfolios or indices with SI or climate goals (55%) and the lack of transparency in ESG ratings (45%).