Institutional Investors Mobilize Capital for Impactful Investments, BNP Paribas Report Reveals

BNP Paribas’s latest survey reveals that institutional investors are increasingly prioritizing investments that offer positive impacts alongside financial returns. The survey, which included 420 asset owners and managers, hedge funds, and private equity firms, highlights the growing importance of environmental, social, and governance (ESG) factors in investment decisions.

Although data limitations remain a significant barrier to ESG integration, institutional investors are incorporating ESG considerations into their portfolio management and investment strategies. The survey, called BNP Paribas’s ESG Global Survey 2023, is the fourth edition and will be released in three separate reports throughout the year. The first report focuses on ESG data and reporting, the second on net-zero objectives, and the third on the integration of ESG expertise in operations.

Key findings of the survey include the acceleration of low-carbon transition strategies, with 41% of respondents indicating that net-zero commitment is a current priority for their organizations. This represents a significant increase from 2021 when only 18% had committed to net-zero targets. Impact investing is also gaining traction, with 54% of respondents planning to use it in the next two years.

However, data quality remains a major obstacle, with 71% of respondents citing inconsistent and incomplete ESG data as a significant barrier to greater ESG adoption. To overcome these challenges, 65% of respondents are using and comparing multiple sources of data, while 37% conduct their own research methodologies.

The survey also highlights the need for more comprehensive biodiversity data, as 66% of investors believe they should do more to account for biodiversity loss and other environmental goals. Additionally, active ownership, where investors actively engage with companies on ESG issues, is expected to be a key objective for 45% of respondents in the next two years.

ESG expertise is being integrated into investment-related operations, with 51% of respondents saying their organizations have incorporated ESG expertise and data into portfolio management and investment decisions. The Asia-Pacific region is leading in this regard, with 57% of respondents reporting integration. Regulation and reputational risks are major drivers for ESG adoption, with investors particularly focused on climate change and decarbonization.

Sophie Devillers, Head of Sustainable Finance at BNP Paribas, emphasizes that institutional investors are moving from asking why to integrate ESG to focusing on how to implement sustainable strategies. She believes that the next two years will be crucial for practical implementation.

Delphine Queniart, Head of Sustainable Finance Client Engagement at BNP Paribas, highlights that sustainable finance is maturing rapidly as investors mobilize globally. Limited data quality is being addressed through collaboration and new data management techniques, enabling investors to take advantage of opportunities and direct capital toward investments that deliver measurable impacts.

Marie-Gwenhaelle Geffroy, Global Head of ESG, Sustainability, and Private Capital Practice at BNP Paribas, underscores the importance of ESG data in assessing portfolios, managing risk, and incorporating sustainability into investment strategies.

The survey collected data between April and July 2023 from 180 asset owners, 180 asset managers, and 60 hedge funds and private capital firms across Europe, Asia Pacific, and North America. The total estimated assets under management of the respondents are USD 51.2 trillion. BNP Paribas’s Securities Services business, a leading global custodian, provided the survey insights.

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