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Climate risk most-important factor for clients, says Russell Investments

It was the biggest issue for managers with clients in Canada, the UK, Australia and New Zealand


Pete Carvill

A survey from Russell Investments has named climate risk as the factor dominating client concerns around the world.

The 24-page report, titled The ESG Journey Accelerates: 2022 Annual ESG Manager Survey, states that climate risk was named by fund managers as the single largest ESG issue that their clients discuss, up to 45% of responses from 39% in 2021.

In addition, Russell Investments wrote, 23% of respondents chose environmental issues in general, versus 21% in 2021. Climate risk was identified as the biggest issue among managers with client bases in Canada, the UK, Australia, and New Zealand. When combining climate risk and environmental issues, the client base in continental Europe, Australia and Canada had the largest weight in environmental-related topics.

Jihan Diolosa, head of global ESG strategy at Russell Investments, concluded: “As ESG integration reaches universal recognition within the asset management community, there remains a very diverse range of views as to how these considerations should be addressed. In addition, we see significant variation in the underlying client needs which asset managers are having to cater for. This poses a real challenge for managers – one of the big issues identified in our survey – and has led to a rapid growth in the number of ESG and sustainable solutions as investment providers seek to meet these needs. An in-depth understanding of these approaches, their merits and limitations is now more important than ever to help investors meet their long-term goals.” 

The firm also said that it was interesting that 10% of respondents selected diversity, equity, and inclusion (DEI), compared to 15% from the previous year, while 15% of respondents chose ‘others’ versus. 11% from 2021. Russell Investments particularly noted that many in this category cited both climate risk and DEI as equally large issues. In fact, the number of firms that cited DEI in the comments under ‘others’ was larger than the previous year.

DEI concerns were most prominent in the US versus other regions, where 16% of US-based firms cited it as the biggest ESG issue they hear from their client base. While the number declined from 31% last year to 23% this year, factoring in the respondents that flagged DEI as a big issue in the ‘others’ section leads to an overall level of concern that is similar to last year’s.

Russell Investments said that its survey spoke to 236 participants, of which 184 offer equity strategies, 147 offer fixed income strategies, 77 offer private markets strategies, and 66 offer real assets strategies. Over half (58%) of the respondents were headquartered in the US, 16% were based in the UK, and 9% were based in continental Europe, with the rest located in other regions. 28% of the respondents had AUM of less than $10bn, while 33% of the participants have over $100bn in AUM.