European CFA holders say ESG appropriate for institutional investors, but decisions shouldn’t be mandated

Study made against backdrop of EU Sustainable Finance Action Plan.

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A clear majority (85%) of CFA holders in Europe responding to a CFA study ‘agree’ or ‘strongly agree’ that taking ESG matters into account in investment decisions is appropriate for institutions such as pension funds, but most don’t believe this should be mandated by regulatory bodies such as the EU.
Two thirds of respondents (66%) said the decision on ESG factors to be considered in investment decisions should be left to clients and their asset managers. But, a relatively high 27% said they thought some related regulations were appropriate, with a further 12% saying rules should apply, but only in certain cases.
Asked what this would mean in practice for fund managers, 60% of respondents said that a mandate to consider ESG analysis should mean that they have ‘documented’ their consideration of ESG factors, but are free to make investment decisions.
The CFA Institute is the leading global body for professional investment certification. The study is titled: “The Evolving Future of ESG Integration in Investment Analysis.”
The views were expressed in a survey sent by the CFA to just under 24,000 European members between July 17th and 31st. The survey received responses from 645 members (2.7% response rate).
The CFA said it posed the questions to gauge member sentiment against the backdrop of the EU’s Sustainable Finance Action Plan, which amongst other initiatives is recommending the creation of ESG labels and product ratings to improve the comparability and accountability of sustainable finance investment products.
In terms of the main respondent types, 42.3% were portfolio managers, 16.4% consultants and 6.6% corporate financial analysts.The majority of respondents had held the CFA for more than 6 years, with 20% being CFA holders for 11-15 years.
Asked whether they thought it was appropriate for regulators to legislate that ESG factors be part of investment fiduciary duty, respondent views were more nuanced. The CFA asked them to register their opinion on a scale of 1 (Not at all appropriate) to 5 (Appropriate to a great extent).
Interestingly, 44% combined 4 and 5, while 38% combined 1-2, suggesting a much stronger tilt towards a fiduciary approach.
Views were equally split on whether this ESG fiduciary duty should be ‘mandated’ by regulators: 24% of respondents said this was ‘not at all appropriate’, while another 24% said it was ‘appropriate to a great extent’
On the EU’s proposed creation of ESG labels and ratings to improve comparability and accountability of sustainable finance products: 45% of respondents said a relevant label would be desirable, while 37% disagreed.
On the question of an EU taxonomy for sustainability – another of the European Commission’s main proposals – 41% said such a taxonomy should not be decided by regulators, 35% said it should, but not be mandatory, and 24% indicated a regulatory taxonomy is necessary and should be made to ensure consistency of ESG products.
Link to the CFA Institute survey