The backlash against investment strategies that address environmental, social and governance issues is increasing in the US and is affecting the way managers think about integrating such considerations into their funds, according to a survey by HSBC Holdings Plc.
The London-based lender surveyed 310 professionals worldwide in roles related to ESG decision-making from May 31, 2023 to June 24, 2023. These respondents represent $8.9 trillion in assets managed across 292 institutions, HSBC’s global research team led by Wai- Shin Chan and Anushua Chowdhury wrote in a note published this month.
“There is undoubtedly a rise in anti-ESG sentiment in the US,” the analysts wrote. “In our view, it falls largely along political lines and alienates the US.”
The pushback effects are visible in the US. For example, in North America, there is a decline in those who say sustainability is a funding goal. Nearly a quarter of North American respondents this year said sustainability was a primary or secondary goal, compared to 37% who said the same last year.
In addition, about 44% of North American respondents also said their reasons for having an ESG strategy had become weaker over the past twelve months, the survey found.
In the fixed income market, there is a notable change in the way investors integrate ESG considerations into their portfolios, according to the survey. The proportion of respondents who cited the use of ESG integration and labeled bonds increased “significantly” compared to last year’s survey and the long-term trend.
“Both negative screening and the use of ESG ratings have declined as the main method of ESG implementation, which indicates, in our view, further progress on the part of investors to make more forms of ESG analysis,” the analysts wrote.
However, the backlash and scrutiny have hurt US sales of bonds designed to help companies perform well as pressure from investors and Republican politicians mounts.
The acronym ESG was created almost two decades ago with the idea that investors should consider environmental, social and governance risks in their financial calculations. But Republicans in recent years have blasted ESG financial practices and increased their scrutiny of what they call “awakened capitalism.”
One of their main complaints is that investing in environmental, social and governance is part of a broader Democratic effort to prioritize climate change and other social issues that harm the industry. fossil fuel.
HSBC’s ESG survey attempts to understand where investors are today on specific ESG issues, where the momentum is and what the future intentions are, according to analysts.
Photo: A turbine from the Roth Rock wind farm spins on the spine of Backbone Mountain behind the Mettiki Coal processing plant in Oakland, Maryland. (Photo by Chip Somodevilla/Getty Images)
Copyright 2023 Bloomberg.
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