Non-financial performance measurement is biggest hurdle for ESG investing

BNY Mellon whitepaper sets out the challenges for growth in sustainable investment

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Nov 22, 2018, 05:00 ET

LONDON, Nov. 22, 2018 /PRNewswire/ -- Measurability and comparability of non-financial performance remain the biggest hurdles to ESG investment growth, according to a report from BNY Mellon.

In a new whitepaper, ESG Investing: Setting a Course for a Sustainable Future, BNY Mellon says that while ESG (environmental, social and governance) principles are gaining considerable momentum for all investors and their service providers, some critical elements of the new landscape are not in place.

Daron Pearce, EMEA CEO of Asset Servicing at BNY Mellon, said: "Many challenges lie ahead as institutions and asset managers navigate a path through what is a complex and incomplete eco-system. However, we believe now is the time for all investors to start planning their sustainable future, and we are witnessing much activity in the development of ESG standards, taxonomies and legislative proposals."

According to the BNY Mellon paper, there is not yet one common set of international standards to validate the ESG credentials of an investment. For now, investors are leveraging industry-level work on definitions, principles and frameworks alongside emerging data sources, from specialists with proprietary evaluation methodologies to new tools from well-established data providers, including ratings agencies.

"The investment industry is on a journey with ESG," said Daron Pearce. "Sustainable investment has evolved from negative exclusion to positive inclusion. It has moved on from the relatively straightforward approach of avoiding investment in businesses connected to sensitive issues such as gambling and tobacco, to actively seeking responsible investment opportunities that can generate better investment returns and greater social good. This more nuanced approach to sustainable investment requires the development of more complex metrics, benchmarking and monitoring. At BNY Mellon, we are looking into ways of helping clients apply ESG scores to their portfolios and through this determine the correlation between ESG scores and portfolio performance."

BNY Mellon's whitepaper, ESG Investing: Setting a Course for a Sustainable Future, sets out the current issues for sustainable investment, from the work being undertaken by industry bodies to set common principles and frameworks, to the practical challenges that lie ahead for asset owners and asset managers in developing their investment strategies and product ranges.

BNY Mellon
BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries. As of September 30, 2018, BNY Mellon had $34.5 trillion in assets under custody and/or administration, and $1.8 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com. Follow us on Twitter @BNYMellon or visit our newsroom at www.bnymellon.com/newsroom for the latest company news.

Contact:
Bruce Wraight
BNY Mellon
+44 (0) 20 7163 4716
[email protected]

This press release is issued by The Bank of New York Mellon to members of the financial press and media.All information and figures source BNY Mellon unless otherwise stated as at September 30, 2018. The Bank of New York Mellon, London Branch, registered in England and Wales with FC005522 and BR000818. Branch office: One Canada Square, London E14 5AL. The Bank of New York Mellon is supervised and regulated by the New York State Department of Financial Services and the Federal Reserve and authorised by the Prudential Regulation Authority. The Bank of New York Mellon London branch is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from us on request.

SOURCE BNY Mellon