One of the world’s largest surveys of global asset owners asking whether they are integrating ESG factors into their investment has found that 78% of respondents do, and that more believe systemic environmental factors (climate change, biodiversity loss) could be financially material to their assets than traditional investment analysis over the next five years.
The study, titled ESG: Do You or Don’t You, carried out by RI Research – part of Responsible Investor – in partnership with UBS Asset Management, was answered by 613 of the world’s asset owners, representing €19+ trillion from 46 countries. It revealed that a large majority (78%) of responding global asset owners are ‘doers’ – organisations which are already integrating ESG into their investment process. The breakdown of asset owner respondents was 35% pension funds of publicly listed companies, 20% public pension funds, 16% private company pension schemes, and 29% ‘others’ (foundations, sovereign wealth funds, endowments, insurance companies).
In addition, of 334 asset owners responding to a question about which factors will be material to their investments over the next five years, 290 said systemic environmental factors, while 282 said financial factors and 261 named geopolitical issues.
Significantly, while one of the standard reasons given for ESG integration by investors is risk control, the survey reveals that almost half of respondents (48%) also believe that they will be rewarded positively in terms of better investment performance, which a number of respondents say is already the case. The top three reasons responding asset owners give in response to why they are integrating ESG into their investment decisions are: firstly, the materiality of risk associated with not taking ESG into account, second, a positive effect on financial performance, and third because of fiduciary duty.
Europe is the most active region in terms of ESG integration among global asset owners, with 82% of respondents reporting that they are ‘doers’.
Asia, Oceania and Africa had the highest proportion of ESG “adopters”, those intending to integrate ESG into the investment process going forward, indicating a high potential for future growth of ESG in these regions.In particular, the Japanese market contains the highest growth potential of any market covered with almost one in three Japanese asset owners classified as “adopters”.
Despite surveys citing a low adoption of ESG across the Americas, and a relatively hostile political climate for sustainability in the USA, “doers” in the survey outnumbered non-doers, and the US recorded the highest number of asset owner respondents from a single country.
Interestingly, 63% of respondents to the survey said they were not signatories to the UN-supported Principles for Responsible Investment. And encouragingly, 51% of respondents were from corporate pension funds, indicating a shift away from the idea that public pension funds are under more external pressure to take into account ESG in their investments.
RI Research investigates knowledge gaps in the ESG and responsible investment market. Its aim is to produce forward-looking research exploring how financial markets and the investment community view the world’s most pressing sustainability concerns and how they are impacted by the inherent long-term risks and opportunities encapsulated in these issues.
Associated Asset Owner Profiles:
Click the link to take a look and buy the RI Research report, titled: ESG: Do You or Don’t You
Questions the RI Research ‘ESG Do You, Don’t You’ Asset Owner report answers:
- How does the integration of ESG impact financial performance in practice?
- At which steps do investors integrate ESG into their investment process?
- First-hand experiences of the ‘ESG-journey’ from asset owners
- What are the drivers of and barriers to ESG integration?
- How is ESG approached in DC pensions?
- Is ESG influencing asset manager selection?
- What is the role of consultants?
- Do asset owners measure the non-financial impact of their investments?
- What are the implications of ESG developments for future asset owner strategy?