Survey says multiple factors drive ESG investment

Environmental, social and governance (ESG) risks are increasingly relevant to players in global credit markets, reports Moody’s Investors Service.

In a new report, the rating agency said that its recent survey of market players (including institutional investors, issuers, investment dealers and regulators) found that several factors — including increasing investor demand and the growing materiality of ESG risks — are driving firms’ approaches to ESG investment.

The survey, which was carried out at Moody’s ESG conference in London earlier this month, found that 37% of respondents cited the financial materiality of ESG risks, 30% pointed to the need to meet growing client demand for impact investing, and 15% said the need to manage reputational risks are driving their ESG investing efforts.

Additionally, over half (52%) of respondents said that the availability of data and disclosures represents the biggest challenge when integrating ESG into credit risk assessments.

The survey also found that 42% of respondents identified policy momentum as the primary driver of the transition to a more sustainable economy over the next decade, and 34% cited shifting consumer preferences.

“In practice, the drivers of the energy transition vary by sector and are often interrelated, with policy measures stimulating technological innovation. These trends will test the ability of the most exposed issuers to manage and adjust to these risks,” Moody’s said.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.