News & Analysis

Macquarie survey shows skills shortage holding back investors’ ESG efforts

Investors are also demanding better reporting from managers if they are to proceed with their ESG targets.

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A skills shortage is preventing real assets investors from achieving their environmental, social and governance goals, according to a survey by Macquarie Infrastructure and Real Assets.

The lack of skills was identified as the main barrier to making a positive ESG allocation, said 51 percent of the 150 global institutional investors surveyed, with combined assets under management of about $20 trillion. That is despite some 78 percent of respondents agreeing that having a good sustainability strategy improved returns.

The shortage is holding back the 91 percent of survey respondents who expect to increase ESG efforts over the next five years, compared with 58 percent who increased ESG practices in the five years prior to this.

The survey also highlighted significant regional differences when it came to teams having dedicated ESG functions. Some 72 percent of EMEA investors and 71 percent of Australian investors have these functions embedded, compared with 24 percent and 21 percent in the Americas and Asia, respectively.

In addition to the skills shortage, 47 percent also pointed towards a poor quality of performance information from managers. The investors responded that they needed improved measurement and reporting if they were to reach their ESG targets, with only 23 percent of investors currently quantifying the impact of managers’ ESG efforts.

An investigation by Infrastructure Investor found some investors being potentially misled on ESG efforts by managers, as well as displeasure regarding the way some ESG efforts were reported.

“With a lot of managers, it seems like it’s slide 45 in the pitch deck. I get reports from managers where they’ve got little vignettes each month about what they’re doing on ESG. That is a substitute for having a thorough analytical process,” said Bill Watson, chief executive of Australian Super.

Macquarie also noted an evolution from exclusion-based ESG investing to what it described as a “more active and deliberate approach”, including regular reporting, ongoing monitoring and proactive implementation.