ESG Global Survey 2023: charting institutional investors’ (quick) progress towards sustainability

420 institutional investors across Europe, Asia Pacific, and North America, managing $51 trillion in assets: the last and final?chapter of our?2023 ESG Global Survey , out now, provides interesting insight into the strides institutional investors are making towards sustainability. The lowdown? Sustainable finance is maturing fast, as investors move from asking “why” to mastering “how” to integrate ESG into their strategies.

• Good news: our survey confirms low-carbon transition strategies are accelerating. Back in 2018, only 18% of investors pledged a net zero commitment; today, 41% of our panel, comprised of 180 asset owners, 180 asset managers, and 60 hedge funds and private capital firms from 15 countries, say they prioritise this commitment and 48% are planning to do so within the next two years.?
• This momentum is reflected in how organisations are weaving ESG expertise and data into their core functions. 51% of respondents are integrating ESG insights into their portfolio management and investment decisions; 42% have also incorporated them into risk management, and 37% are applying them to monitor ESG compliance rules. This widespread integration shows a significant shift: no longer a “nice-to-have”, ESG is now shaping the very way investors work!
• Meanwhile, ESG integration strategies are?maturing fast.?While in 2021, 75% of respondents favoured a broad integration approach, this year sees a slight drop to 70%, reflecting a focus on more specific approaches. Case in point: in just two years, thematic investing’s popularity has risen from 38% to 47%. Similarly, impact investing has jumped from 36% to 45% and is on track to become the leading ESG approach worldwide. Active ownership, too, is gaining traction, now pursued by 46% of organisations, versus 31% in 2021. And the focus of these engagement strategies is set to expand beyond climate change and decarbonisation to include a broader range of ESG topics.?
• Despite this progress, investors still face obstacles in their path to sustainability. Back in October, we discussed?the lack of agree-upon definition of sustainable investment. Our survey confirms this is a major issue for investors, who find themselves split between personal criteria and external goals, for instance related to the Paris Agreement. There is no clear position on what constitutes the most crucial element of sustainable investing, with no single factor gaining more than 22% agreement globally, showing the influence of individual circumstances on sustainable investing perspectives and priorities.?
• But the most significant barrier to ESG investing, cited by 71% of respondents, remains the quality of ESG data, often deemed inconsistent or incomplete. To tackle this, 65% of investors cross-reference multiple data?sources, while 37% use their own research methodologies.
• And while ESG expertise and data integration is becoming more mainstream in institutional investing, it has yet to permeate all organisational levels and processes. While most investors use ESG integration specifically in relation to ESG or sustainable investing, only half incorporate it in their investment and portfolio management processes. Celebrating progress is necessary, but identifying and overcoming remaining barriers, too, is crucial. BNP Paribas’s ESG surveys (available?here ?in full) are designed precisely to track this advancement… as well as the distance left to travel.?We hope our next survey will reveal even more progress.?See you in 2025!

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New frontiers

How has impact entrepreneurship evolved over the past decade, and what’s in store for the future? To find out, long-time BNP Paribas partner Ulule surveyed 1,000+ French people along with entrepreneurs.

• Giant strides have been made, with 80% of entrepreneurs saying it is now easier to create an impact business than it was 10 years ago. The sector is propelled by consumer demand, with 60% of the French saying they often or occasionally consider social or environmental criteria before making a purchase.
• But challenges remain in the realm of financing, the main obstacle to their development for 40% of impact entrepreneurs. Working actively to help entrepreneurs overcome this hurdle, BNP Paribas’ Act For Impact program has provided €1.2 billion in total financing for social entrepreneurs in France. Globally, BNP Paribas has funded the social impact entrepreneurship sector as a whole to the tune of €6.3 billion .
• As for what comes next, we asked four entrepreneurs to tell us what they imagine impact entrepreneurship will look like in ten years. Food for thought!

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Explorers

• BNP Paribas experts are watching closely as stars align to give sustainable infrastructure a decisive push in the Asia Pacific region .
• The region's economic growth fuels rising power demand, underscoring the importance of substantial transactions for key renewable projects. Exemplifying this is ReNew 's global energy initiative, backed by a record-breaking US$1 billion loan— a transaction supported by BNP Paribas and the largest one in India's renewable sector.
• Things are moving fast down under too: in 2022, renewable energy accounted for a record 35% of Australian demand, creating significant investment opportunities in decarbonisation and digitalisation.

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Milestones

BNP Paribas Solar Impulse Venture Fund helps energy renovation leader Hello Watt advance on its journey.

• Since 2017, Hello Watt has been a beacon for homeowners navigating the complex area of energy renovations. Hello Watt’s app allows individuals to track, understand, and control their energy consumption and helps them identify the most relevant work for their home. A renovation expert then takes charge from A to Z, organising the worksite with craftsmen from the Hello Watt network.
• Hello Watt has just completed a €12 million financing round with two impact investors, BNP Paribas Solar Impulse Venture Fund and Starquest Capital. After 6 years of self-financed growth, this new boost will help Hello Watt accelerate its development strategy in France and Europe by recruiting 100 talents over the next year.

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From the observation post

Climate anxiety is on the rise. The most efficient remedy? A clear roadmap for action.

• That’s exactly what our newest book recommendation provides. Delphine Poisson , Sustainability Project Manager at BNP Paribas Leasing Solutions , has picked economist Jeremy Rifkin’s Green New Deal , which charts a path towards a third industrial revolution built on a few key ingredients: low-carbon infrastructure and renewable energy, the Internet of Things, and the circular economy. Curious? Find out more here !