Sustainable investing helps manage long-term risk for global asset managers. - photo

Sustainable investing helps manage long-term risk for global asset managers.

Erica Pondillo - photo

by Erica Pondillo

Vice President

Embedding sustainability into investment portfolios has become a high-priority consideration for institutional asset owners across the world, according to new research conducted by Radius for FTSE Russell, a subsidiary of the London Stock Exchange that provides analytics, benchmarks, and data solutions for the industry. In the survey of more than 179 global asset owners, 84% are either implementing or evaluating sustainability into their portfolios, and almost two-thirds (64%) are doing so to mitigate long-term investment risk.

 

In the survey of more than 179 global asset owners, 84% are either implementing or evaluating sustainability into their portfolios, and almost two-thirds (64%) are doing so to mitigate long-term investment risk.”

 

This is the fifth year that Radius has partnered with FTSE Russell to determine sustainability/environmental, social and governance (ESG) considerations among global asset owners, and the first year that the survey has focused on sustainable investment in general. The majority of participating institutions were located in North America (40%) and EMEA (36%) followed by Asia Pacific (19%). Industry respondents were primarily pension funds/plan sponsors (42%), insurance companies (18%), government organizations (12%) and endowments/foundations (10%). Nearly half  of the participating asset owners have an AUM total of $10 billion or more. Key insights from the survey include:

Sustainability mitigates long-term investment risk.

Nearly half (49%) of asset owners in North America and a majority in EMEA (60%) implement sustainable investment strategies to avoid harming their institution’s reputation. Climate and carbon are the leading priority focus area for over two-thirds (67%) of asset owners.

Regulation enables sustainable investment.

Within the context of sustainable investment, asset owners tend to view regulation as enabling greater adoption of sustainable investment. Over three-quarters (78%) of participants who see the benefits of regulations say that they can improve the quality and consistency of corporate reporting and disclosures. More than six in ten (61%) say that the development of corporate ESG and climate-reporting requirements are beneficial to their institutions’ investment approaches.

Rapid 3-year growth for sustainable investing.

Over eight in ten (84%) of global respondents are implementing or evaluating sustainable investment considerations in 2021, up from a little over half (53%) in 2018. In North America, these considerations were reported by 68% in 2021 versus 39% in 2018, while EMEA went from 72% to 97% during the same time period. However, Approximately nine in ten asset owners in Asia Pacific (88%), UK (90%) and Europe (97%) have strong appetite for sustainable investment, but less than half (45%) of US-based asset owners are currently implementing sustainable investment. In EMEA, sustainable investment evaluation and adoption by asset owners is nearly universal.

Download a PDF with more survey insights at FTSE Russell.

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