Capital Group annual study reveals ESG holds steady in a volatile world  

ESG adoption remains at an all-time high, and inches even higher in EMEA, according to Capital Group, one of the world’s largest and most experienced active investment managers, with more than US$2.7 trillion² in assets under management.

Its fourth annual ESG Global Study* found that EMEA is the leader with 94% of respondents adopting ESG – up one percentage point from last year. ESG adoption rates in Asia-Pacific (93%) and North America (75%) are unchanged from last year. Survey respondents include institutional investors and global intermediaries from 24 countries. 

Demand for diverse investment themes 

50% of surveyed investors expect to increase allocations to multi-thematic ESG strategies over the next two to three years, with strong appetite from EMEA, where 55% are set to raise allocations.

·       Respondents cited diversification (64%), the potential for better risk-adjusted returns (50%) and broader ESG impact (49%) as core benefits of multi-thematic strategies over single theme strategies.

AI viewed as a data tool and rise of AI seen to bring new ESG investment risks 

While investors expect to turn to AI to address data challenges, its rapid rise is perceived to pose new material ESG risks to investment decisions.

• Similar to past surveys, ESG data consistency and reliability are still viewed as significant challenges to adoption (53%). Only 10% of respondents use AI now to analyse ESG data, but 53% plan to use it in the future. 
• Six out of 10 investors view the impact of AI as the most material social issue over the next 12 months while 54% are concerned about the environmental impact from AI’s power-intensive operations.

ESG headwinds and tailwinds  

Nearly six in 10 (58%) think investors will maintain a long-term commitment to ESG despite current geopolitical and macroeconomic headwinds.

A majority of respondents say the pace of sustainable policy implementation (57%) and speed of ESG regulatory change (56%) present tailwinds that will support faster progress on ESG. 

“This year’s ESG Global Study has underscored global investors’ long-term commitment to ESG in a volatile world. ESG adoption has remained high, with nine in 10 investors in the study identifying as ESG users. And over half of respondents (57%) indicate plans to increase allocations to ESG funds in the next 12 months,” said Jessica Ground, Global Head of ESG, Capital Group.“New areas of interest like AI have emerged from our 2024 ESG study. Investors are taking tentative steps to use AI as a tool to tackle ESG’s data challenges. AI as an investment opportunity, however, has prompted greater deliberation of related ESG risks. With an ability to take a more granular view on opportunities and risks, most respondents view active managers as well-equipped to navigate ESG headwinds and overcome challenges.”