A new survey by Morningstar Indexes and Sustainalytics highlights the growing importance of environmental, social, and governance (ESG) factors in investment decisions among asset owners. The Voice of the Asset Owner Survey 2024, which surveyed 500 asset owners across North America, Europe, and APAC with a total of $18 trillion in assets under management, found that 67% believe ESG has become more material to their investment processes in the past five years, with 23% reporting a significant increase. By region, APAC leads with 71% of asset owners citing increased ESG relevance, followed by Europe (68%) and North America (61%).
The study also noted growing attention across all ESG categories. Environmental factors saw the biggest rise, with 64% of asset owners highlighting their increased materiality, compared to 52% last year. Social and governance factors also saw significant gains, with the materiality of social factors jumping from 38% to 58%, and governance rising from 43% to 55%. The top environmental concern for asset owners is the transition to net zero, cited by 55% of respondents, while labor practices emerged as the most critical social factor, rising to 51%. For governance, business ethics took the lead at 54%, up from 40%.
Asset owners are increasingly integrating ESG into their strategies, with an average of 42% of assets under management allocated to ESG-focused strategies, up from 38% in 2022. Additionally, 35% of asset owners reported that over half of their assets are managed with ESG considerations. Many are also expanding their internal ESG capabilities, with 50% now relying on internal resources, and 22% employing dedicated ESG teams, up from 15% last year.
The survey revealed that active ownership is seen as an effective tool in driving ESG implementation, with 54% of respondents finding it useful. Direct engagement was ranked as the most impactful method of active ownership, while proxy voting was seen as less significant. Key drivers for adopting ESG strategies include senior management support (36%), regulatory requirements (30%), and stakeholder pressure (29%).
Lastly, the report highlights the growing optimism around the role of artificial intelligence in ESG investing, with 82% of asset owners expecting AI to assist with data collection, reporting, and analysis. Despite the progress, challenges remain, particularly the need for more accurate, standardized ESG data.