‘Staggering increase’ in global focus on responsible investing: survey
The majority (85 per cent) of global investment professionals said responsible investing is at least somewhat important to their organization, up from 68 per cent in 2018, according to a new survey by Aon.
The survey found this growth occurred across all geographic regions and institutional investor types, including corporate pension plans, public pensions, defined contribution plans and endowments and foundations, and defined contribution plans.
Some 87 per cent of respondents in the U.K. and 85 per cent in Continental Europe said responsible investing is important to their organization, compared to 66 per cent and 80 per cent, respectively, in 2018. Though still representing a year-over-year jump, these numbers were slightly lower in the U.S. (78 per cent in 2019 and 57 per cent in 2018) and Canada (78 per cent in 2019 and 68 per cent in 2018).
“I am sure it comes as no surprise that responsible investing is growing in importance in regions like the U.K. and Continental Europe, where there’s been a marked increase in RI regulation,” said Meredith Jones, author of the report and global head of responsible investing at Aon Hewitt Investment Consulting Inc., in a press release. “However, we are also seeing significant investor-led RI efforts in areas where regulation is not driving activity. It seems institutional investors are increasingly concerned about risks associated with non-financial factors within their portfolios, and RI offers multiple ways to capture, evaluate and mitigate those risks.”
Globally, the survey found 44 per cent of investors said they have a responsible investment policy already in place, while another 24 per cent said they have one in development.
More than 40 per cent of respondents said they believe the incorporation of non-financial environmental, social and governance data results in better investment performance. One third said responsible investing is “nearing a tipping point,” an increase of nearly 10 percentage points since the 2018 survey.
In addition, 64 per cent of respondents said they allocated assets to some type of responsible investing strategy, up from 49 per cent in 2018. Among those respondents, 59 per cent said they’d maintain or increase their allocations to responsible investing in the coming year.
Despite these gains, Aon suggested ambiguous regulatory policies in the U.S. may be holding investors back from responsible investing. Nearly half (44 per cent) of survey respondents in the U.S. said responsible investment plays no role in their investment decision-making, compared with 29 per cent in Canada, 27 per cent in Continental Europe and 11 per cent in the U.K.
Globally, the percentage of respondents that said they don’t consider responsible investing in the manager selection process dropped from 37 per cent in 2018 to 29 per cent this year.
“The staggering increase in RI sentiment and activity we witnessed in our 2019 survey makes one thing abundantly clear: responsible investing is officially a going and growing concern,” said Jones. “The changing regulatory framework will play a larger role in some investors’ RI endeavours, while others will adopt increasingly ‘mainstream’ ESG integration, and still others will embrace roles as global change agents.
“Regardless, institutional investors seem to understand that the world will look very different in the coming years and are evolving now to meet the investment challenges that lie ahead.”