More than eight in 10 (83 per cent) asset managers and fund professionals say there is reputational risk if climate commitments are not adhered to, research from CACEIS UK in partnership with Funds Europe has shown.

The research revealed that, whilst recognition on asset management boards is still growing, only 36 per cent of respondents said that their asset management boards are overseeing the integration of climate risk considerations into business and risk management processes.

It also discovered that only 31 per cent of fund boards have sufficient information flow on climate risk at a granular detail across all funds that they oversee.

Over a third of fund managers (34 per cent) do not provide any investor reporting on climate risks and 19 per cent of respondents mentioned that they have the reporting in place to provide full disclosure on climate risk.

Furthermore, the research found that 70 per cent believed ESG standards will become or are already mandatory, slightly down on the 73 per cent that answered the same question in previous research last year.

However, more people now feel that ESG standards are already mandatory (31 per cent as opposed to 22 per cent), which “signifies the scale of the challenge facing the industry and the inevitability of mandatory reporting”.

CACEIS UK country managing director, Pat Sharman, commented: “CACEIS’s latest study explores the drivers for climate-based investment products, the reporting requirements from regulation, and the critical role that climate-related data will play in this rapidly developing market.

“As an industry we have a big task ahead of us to deliver on our climate change commitments and to comply with their reporting requirements. A major issue seems to be the challenge of a data perception gap. While there are challenges around consistency and standards, they are not significant enough to prevent action in developing reporting and insight on climate risk to help fund boards.

“The industry is also working to address the data consistency issue through a number of standards initiatives, including the International Sustainability Standards Board (ISSB) to meet the demand from investors for more transparent and comparable ESG reporting by companies, launched following COP26 last year.

“Finally, it’s good to see a growing focus on education, which we think is critical to help participants across the industry interpret and make sense of data relating to climate risks.”

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