Report examines ESG investment growth hurdles

Measurability and comparability of non-financial performance remain the biggest hurdles to ESG (environmental, social, and governance) investment growth, according to a recently released BNY Mellon report.

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The whitepaper revealed while ESG principles are gaining considerable momentum for all investors and their service providers, some critical elements of the new landscape are not in place.

“The investment industry is on a journey with ESG,” Daron Pearce, BNY Mellon CEO of Asset Servicing, said. “Sustainable investment has evolved from negative exclusion to positive inclusion. It has moved on from the relatively straightforward approach of avoiding investment in businesses connected to sensitive issues such as gambling and tobacco, to actively seeking responsible investment opportunities that can generate better investment returns and greater social good. This more nuanced approach to sustainable investment requires the development of more complex metrics, benchmarking and monitoring.”

Pearce said BNY Mellon is looking into ways to help clients apply ESG scores to their portfolios and determine the correlation between ESG scores and portfolio performance.

“Many challenges lie ahead as institutions and asset managers navigate a path through what is a complex and incomplete eco-system,” Pearce said. “However, we believe now is the time for all investors to start planning their sustainable future and we are witnessing much activity in the development of ESG standards, taxonomies, and legislative proposals.”