Sustainable investment is becoming an ever more important consideration for asset owners across the world, according to a survey conducted by Radius Illumination for FTSE Russell, part of the London Stock Exchange Group’s Information Services Division.
The study revealed that a majority (58%) of global asset owners plan to apply environmental, social and governance (ESG) considerations to their smart-beta strategies this year, up from 44% in 2019. FTSE Russell refers to this trend as Smart Sustainability, and the results indicate a growing number of asset owners who wish to integrate sustainability parameters—especially climate risk—into smart beta indexes.
The study revealed that a majority (58%) of global asset owners plan to apply environmental, social and governance (ESG) considerations to their smart-beta strategies this year, up from 44% in 2019.”
A smart-beta strategy typically focuses on one factor for investments, unlike a multi-factor strategy that gives investors exposure to a portfolio of stocks based on various factors, such as growth, value, low volatility and quality.
This is the third year that Radius Illumination has partnered with FTSE Russell on their Smart Sustainability survey of global asset owners. Some emerging trends by region for 2020 include:
- In Europe, sustainable investment is now firmly part of the mainstream with 81% of EMEA asset owners expressing interest in applying ESG considerations to smart beta (up from 73% last year).
- In North America, the share of asset owners that indicated similar interest jumped to 42%, from just 17% last year.
- Large asset owners are leading the charge with 80% of global asset owners with assets of $10 billion or higher are either evaluating or already implementing sustainability factors in their investment strategy.
- Climate risk tops the list of sustainability themes for asset owners (64%)
The 2020 survey was conducted in January and February among 139 global asset owners. The majority of participants were located in North America (37%), EMEA (37%), and Asia (21%). A wide mix of organization types are represented, including government organizations (28%), corporations or private businesses (18%), and non-profits or universities (12%). The rest is a mix of unions, insurance companies, sovereign wealth funds, health-care organizations and family offices.