In a rapidly evolving global market, institutional asset owners (AOs) face growing complexities as they uphold their fiduciary duties while navigating the demands of key stakeholders, increased regulatory requirements, and shifting market conditions. The latest Morningstar report "Voice of Asset Owners" reveals that 67% of asset owners say that ESG has become more material in the last five years. In addition, almost 6 in 10 believe that social factors have become more material over the past year. This is an increase of 53% compared to last year. These insights are part of the 'Voice of the Asset Owner' 2024 reports, which reflects perspectives from 500 professionals worldwide, representing a combined $18 trillion in assets under management. Below are some of the report’s most compelling findings:
1. Key Insights from the Report
35% of asset owners have more than half of their total assets reflecting ESG considerations, which marks a 21% increase since 2022.
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53% believes ESG considerations go hand-in-hand with fiduciary duty
However, the definition of materiality varies significantly based on the type of plan and regional context. In Europe, materiality extends beyond financial returns, aiming to benefit key stakeholders while considering the broader environmental, social, and governance impacts of investments. In contrast, US asset owners place financial materiality at the forefront, treating ESG impacts as an associated benefit rather than a primary factor in investment decisions. As a result, US organizations have had to adapt their approach to integrating ESG goals. As stated in the Voice of Asset Owners Qualitative Analysis:
“We’ve had to take slightly different steps in order to implement the ESG goals within the US than we have in other markets.” - US Corporate Pension Fund “…broader than that, it encompasses how we view our fiduciary responsibility in the US as opposed to in Europe. Fiduciary responsibility is very narrowly defined in terms of financial risk and return only.” - US Public Pension Fund
78% view active ownership as slightly or very useful in driving the ESG implementation
Active ownership plays a crucial role in implementing ESG strategies. Beyond proxy voting, asset owners are also utilizing collective engagement, shareholder proposals, and direct engagement. Globally, 78% of asset owners surveyed consider active ownership to be at least somewhat useful in advancing their ESG programs.
Asset owners increasingly view data as the most essential element for implementing ESG strategies, beyond ratings and indexes.
As the leading provider of data on diversity, human rights, health & safety, and labor rights, it is positive to see asset owners find data (over ratings and indexes) the most useful input for the overall implementation of an ESG strategy. On the asset management side, a recent example of this is BNP Paribas Equality Roadmap, emphasizing the importance of social data under pillar #6.
38% find “lack of standardized data” as a barrier to pursuing an ESG investment strategy.
However, while most asset owners agree that ESG data, ratings, and indexes have improved over the past five years, they also recognize that further progress is needed. Particularly in enhancing data accuracy and standardizing reporting.
“The availability of products is market-driven, and the market will respond to what perceived needs are. [...] So, for us, having better reporting, better data on the impact of what we’re doing will be the elements that we really want to see in the products we’re going for.” - US Corporate Pension Fund“The challenge with data at the moment is yes, in ESG space you have combination of qualitative and quantitative data. So, you have analyst overlay at the same time they would have quantitative inputs as well. Sometimes when you compare different rating systems with one of their peers, ratings can be very different, and it makes you question as to what risk is material for this particular company if two big service providers are looking at and rating these risks differently.” - Australian Superannuation Scheme
The shift toward social factors underscores the need for robust, reliable data to drive sustainable, long-term returns that align with evolving priorities. Denominator is committed to bridging the data gap by providing the world's largest and most comprehensive database on social metrics covering more than 5M+ public and private companies. We do this to empower investors and corporations with the needed data to make informed and impactful decisions.
Read the full Morningstar Voice of Asset Owners Survey 2024:
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