GLOBAL - Investment consultants deem the lack of explicit client demand to be a barrier preventing quicker development of environmental, social and governance (ESG) services offerings, according to a survey conducted by the European Sustainable Investment Forum (Eurosif).
Based on their experience, they found this to be the biggest obstacle fund managers face, ahead of a lack of knowledge and understanding from fund manager staff as well as concerns over legal and performance issues.
The surveyed consultants said they believe asset owners need to be more explicit about responsible investment (RI) by clearly stating their beliefs on ESG issues and RI.
But despite RI-related service development being a recent phenomenon among investment consultants - with 2005 and 2007 being the years of peak development - the 2009 Investment Consultants and Responsible Investment Study showed it is growing quickly.
At least 89% of the responding consultants said they anticipate there will be an increase in clients' interest towards ESG matters within the next three years, mainly as a result of investors' branding and reputation needs, and the evolution of fiduciary duty being consistent with ESG integration.
The report also found that positive selection is considered to have the most beneficial impact of performance and is therefore advised on most by consultants. Investors seek the most advice on environmental issues, particularly climate change, followed closely by social and governance issues, according to the survey.
That said, ESG still seems to be in its infancy as Eurosif approached over 300 consultancy firms to take part but received just under 50 responses in total, and 84% of investment consultants chose not to respond.
In the UK, another survey of 71 private and institutional investors by the EIC Environmental Investment Network argued long-term regulatory frameworks are required to increase investment in environmental technologies and services.
Respondents to the survey, entitled Environmental Investment - the investors perspective, acknowledged that because of the current economic climate, investors are generally taking longer to reach investment decisions and are more selective about which commercial sectors and individual propositions to invest in.
Furthermore, they identified that banks are seeking later stage and less risky investment opportunities, of which there are few in the relatively immature environmental sector.
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