Survey reveals how managers can integrate ESG measures

Stronger mandates and a greater emphasis from asset owners in relation to ESG (environmental, social and governance) issues would accelerate their integration by asset managers, according to a survey conducted by First State Investments.

The survey, conducted at First State’s Responsible Investment (RI) Forum, marking the launch of First State’s 6th Annual RI Report also found that just 17% of respondents believed that improved communication from companies would increase ESG in the investment process. 14% felt that new regulation would have an impact.

Asked if they would invest in a company with a poor but improving ESG score/rating, 88% of those responding agreed. Some 44% of respondents said a move towards annual performance reporting would have the greatest impact in encouraging long-term investment, and a further 36% believed that ending

corporate earnings quarterly reporting would contribute to this effect.
“As active investors, we have always maintained that the incorporation of ESG factors into our investment processes will deliver significant long-term benefits to our clients,” said Mark Lazberger, CEO at First State Investments. “The year ahead will see further evolution and enhancement of our global RI strategy, as well as embedding RI considerations more deeply into our business globally.”

Will Oulton, global head of Responsible Investment at First State Investments, said the findings confirm that signals from asset owners have a significant role in helping speed up the adoption of ESG factors in the investment process.

One of the key issues debated was the role of investor engagement with companies. “This is an area of continuing focus for us and one which is important to strengthen, both by our own direct activities and by collaborating with other investors where appropriate and where we can add influence and value,” said Oulton.

The top three factors considered to have the greatest impact on improving the wider investment industry were distribution of loyalty dividends and votes for long-term shareholders (39%); new financial instruments to meet a fit-for-social-purpose test (20%), followed by the introduction of a seventh PRI Principle to encourage long-term investment (13%).

First State Investments is the international arm of Colonial First State Global Asset Management (‘CFSGAM’), the specialist asset management business of the Commonwealth Bank of Australia.


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