Two-thirds (67 per cent) of institutional asset owners believe environmental, social and governance factors have become more material to investment policies in the past five years, citing the environment and issues around net-zero emissions as key ESG materiality drivers, according to a new survey by Morningstar Inc.

The survey, which polled more than 500 global asset owners, found the No. 1 ESG implementation issue was impact on returns (38 per cent), followed by regulation (33 per cent). Just half (49 per cent) of asset owners said regulations and related reporting requirements were helpful.

Roughly a third of asset owners said a lack of standardization (30 per cent) and reliability and timeliness (29 per cent) were the top factors that hinder ESG market data. Nearly half (48 per cent) said they’d benefit from increased accuracy in ESG data, ratings, indexes and tools, a percentage that increased among respondents with assets under management of US$10 billion or more (53 per cent).

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In order to close gaps around the quality of ESG data, asset owners said they’ve engaged with a range of stakeholders, including international standard-setting bodies (38 per cent), rating agencies (36 per cent) and politicians (34 per cent).

The majority of respondents said the adoption of artificial intelligence will increase in five years, most likely in data collection (70 per cent) and ESG analysis (66 per cent).

“As stewards of some of the largest pools of global capital, asset owners have stayed anchored to their fiduciary duty despite a range of challenges related to ESG market data, regulatory confusion and market performance,” said Arnold Gast, ESG research director at Morningstar, in a press release. “As their job becomes increasingly complex, asset owners continue to raise their expectations of a range of key stakeholders to provide better insight, research, data and tools to address the evolving sustainable investment landscape.”

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