ESG Incorporation Challenges Remain

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    Environmental, social, and governance investing is important to the alternative investment management industry, although incorporation challenges remain, says a survey from the Chartered Alternative Investment Analyst Association and private equity manager Adveq. It found 77 per cent of CAIA members ‒ including asset owners, asset managers, and consultants ‒ say ESG investing is more important now than it was three years ago and 78 per cent predict ESG investing will be more important three years from now than it is today. However, only 52 per cent of asset owners and managers now incorporate ESG factors into their investment decisions with ethical principles, constituents’ demands, and business opportunities driving their incorporation. Holding some investors back, particularly in the U.S., is the emphasis on short-term earnings, along with the low funding levels at some public pension funds where officials might feel they can’t afford the long-term play that is responsible investing. The biggest hurdles to ESG incorporation are a lack of standardized, comparable data on material sustainability issues; managing varied constituency requirements; finding suitable investments; and a lack of ESG-dedicated resources.