But global study shows growing importance of sustainable investment
Some of the world’s largest investors have revealed a disconnect between their perceptions of the importance of sustainability and how they actually make investment choices.
The Schroders Institutional Investor Study 2018 surveyed 650 institutional investors across the globe, including 175 in North America, and found that 32% said that the sustainability focus of the investment had little to no influence on their investment decision-making.
That means sustainability ranks significantly less important than factors such as strategic asset allocation, fund manager track record, anticipated return and risk tolerance.
“Investors clearly recognise that investing sustainably is going to be more and more important going forward, but this approach is yet to sit at the heart of their investment process,” said Jessica Ground, Global Head of Stewardship, Schroders.
Better returns
However, the larger institutional investors generally rank sustainability as more important and those who did so showed a longer-term investment horizon, more investment confidence and prioritised risk-adjusted returns.
Those institutions that placed high importance on sustainability were found to be more confident in meeting their expectations compared to those who did not (56% vs 37%).
Almost three quarters of those polled said that sustainable investing would grow in importance over the next five years and 47% said they had increased their allocations to sustainable investing over the past five years.
Over a third of investors (34%) globally said that evidence demonstrating that investing sustainably delivers better returns would boost their allocations to investing sustainably. Notably, this rose to just under half (49%) for investors in North America.
Challenges for most
Despite the intentions and the returns, around three quarters of respondents said that they find investing sustainably at least somewhat challenging.
More than half (51%) said performance concerns were the biggest challenge while a lack of transparency and difficulty in assessing risk were other key challenges.
“Over time, this study highlights that sustainability is going to increasingly sit alongside institutional investors’ more long-standing investment priorities, although there still remain barriers to overcome to achieve this in the near term,” added Ground.
