In light of the marketplace nowadays being filled with as much uncertainty since the financial crisis of 12 years ago, a new survey published recently by S&P Global Market Intelligence examined how portfolio management processes have been evolving to account for environmental, social and governance factors (ESG).
S&P Global Market Intelligence indicated ESG investing is increasingly playing a critical role in credit risk analysis. According to the survey, 89% of respondents say their organization has an explicit ESG policy in place, and 83% say ESG factors are integral to what they do or are playing a growing role in the credit risk area.
The 2019 ESG survey, which features 194 credit risk professionals working in financial services firms around the world, examined how their portfolio management processes have been evolving to account for ESG factors.
“Clients are increasingly looking to consider ESG factors as part of a holistic approach to accessing credit risk,” said Whit McGraw, managing director and global head of credit risk solutions at S&P Global Market Intelligence.
“Our survey results reaffirm that sustainable investing is gaining traction and these ESG indicators are playing a bigger role for credit risk and portfolio management professionals,” McGraw continued in a news release
Other highlights from the S&P Global Market Intelligence 2019 ESG Survey included:
— ESG integration on the rise: Majority (86%) of respondents say heightened investor demand is a key influencer to consider ESG factors more fully.
— Formalized approach to ESG issues: A higher percentage of Asia-Pacific (63%) and Europe, the Middle East and Africa (58%) respondents have a formalized responsible investment policy compared to firms in the Americas (46%).
—Top three motivators for incorporating ESG considerations: Improved long-term returns, brand image and ability to identify credit quality changes.
— Use of data and tools: Three quarters of respondents have internal tools and models in place, with APAC leading the charge (86%).
— Barriers to greater ESG adoption: Lack of advanced tools (62%) and robust data sources (53%) as well as the cost of technology advancement (52%).
— Addressing challenges: Organizations are looking to build up ESG competencies in their Credit Risk groups as well as invest in technology solutions in support of ESG credit risk management.
To access the full report, go to www.spglobal.com/esg-survey.