Schroders: Sustainable Investment Sceptics Decline10.30.2019
Sustainable investment cynics have fallen by almost 50% in three years, as climate change has now become the main focus of shareholder engagement, Schroders Institutional Investor Study 2019 has found.
— Schroders PR (@SchrodersPR) October 30, 2019
The proportion of investors globally who do not believe in sustainable investment has fallen from 20% in 2017 to 11% this year. This decline was most striking in Latin America with sceptics falling from 29% in 2017 to 12%.
Q. Which, if any, of the following specific factors do you consider a challenge of investing in sustainability?
Almost one-fifth of investors globally (19%) however stated that they do not invest in sustainable investment funds.
Climate change has also become the most important area of engagement among investors globally, overtaking business’ corporate strategies. Accounting quality, bribery and corruption, diversity and labour rights all increased in significance as stewardship topics.
Q. Which areas do you believe are important for investment managers and asset owners to engage on?
Exactly three-quarters of investors said that they expect sustainable investing to grow in importance over the next five years, an increase on the 67% recorded in 2017. Indeed, a resounding 84% of investors in Europe said they expect sustainable investing to grow in importance over the next five years.
The lowest proportion was investors in Asia-Pacific, with 67% anticipating it will grow in importance.
Q. How do you expect the role of sustainable investments to change in the next five years?
Jessica Ground, Global Head of Stewardship, Schroders, commented:
“These findings deliver perhaps some of the clearest evidence to date of how even the most sceptical of institutions are now recognising that investing sustainably can deliver better long-term outcomes.
“This trend is also no longer confined to specific regions globally; investors across all the continents surveyed – including those which are often not associated with a strong sustainable focus – are increasingly convinced by the benefits that sustainable investing can deliver.
“The study emphasises that this is only going to grow over the next five years with the likes of climate change now viewed by investors globally as the most important issue for stewardship engagement. We believe that establishing a clear understanding of the climate change investment risks facing our clients is a vital step towards managing those associated risks.
“That is why we have developed our Climate Progress Dashboard, Carbon Value at Risk and Physical Risk modelling to help our analysts and fund managers measure and manage the wide risks climate change poses to our clients’ portfolios.”
Investing sustainably still remains a challenge for investors, however, with 76% globally stating that it was at least somewhat challenging, consistent with the proportion recorded in 2017. Performance concerns and a lack of transparency and reported data were the key issues, although difficulty measuring and managing risk also increased as a challenge for investors globally.
Q. How challenging do you find investing sustainably?
Institutions globally stated that the availability of better data or evidence which could demonstrate that investing sustainably delivers better returns would be a key factor in encouraging them to allocate more to sustainable investments. This proportion was most striking among investors in North America (67%).
Greater transparency and better Environmental, Social and Corporate Governance-related benchmarks were the next most important factors internationally.
Globally, 64% of investors said integrating sustainability across the investment process was the preferred method for implementing sustainable considerations. Specifically, some 70% of investors in Europe favoured this method.
However, the picture was less conclusive in Asia-Pacific with 57% of investors leaning towards negative screening, slightly ahead of the proportion which preferred full integration.
This global study was commissioned by Schroders for the third consecutive year to analyse institutional investors and their attitudes towards investment objectives, risks, private assets and sustainable investments.
The respondent pool represents a spectrum of institutions, including pension funds, insurance companies, sovereign wealth funds, endowments and foundations managing approximately $25.4 trillion in assets.
The research was carried out via an extensive global survey during May 2019. The 650 institutional respondents were split as follows: 175 in North America, 250 in Europe, 175 in Asia-Pacific and 50 in Latin America.
Respondents were sourced from 20 different locations across the world.
Investors are seeking the tax efficiency, trading flexibility and cost benefits of ETFs.
US Department of Labor has allowed pension plan fiduciaries to consider ESG factors.
Goldman Sachs Asset Management agreed to pay a $4m penalty.
FINRA membership marks further momentum in WisdomTree Securities' digital strategy.
The prior administration’s restrictions on retirement plans and ESG were removed.