Stockholm (NordSIP) – As investors’ awareness of sustainability issues and investment practices evolves, there is often a natural progression from excluding nefarious companies to promoting best practices and engaging with laggards to move towards common goals.
The findings of Schroders’ Institutional Investor Study 2020 are in line with such an evolution. According to the asset manager’s survey, active engagement and stewardship are becoming increasingly important tactics for investors at the same time as they are expressing increasing concerns about greenwashing.
The Power of Engagement
In its study, Schroders surveyed 650 institutional investors managing US$25.9 trillion in assets and reviewed the key aspects of sustainable investing. Of the six strategies to integrating ESG it reviewed, Schroders found that support for “active company engagement and stewardship” had grown in support the most (21 percentage points) from 2019 to 2020. The second-largest increase (17 percentage points) in popularity was in the use of positive screens. At the same time, only 36% of institutional investors focused on exclusions in 2020, compared to 53% in 2019.
The Dangers of Greenwashing
According to the report, the share of institutional investors that do not conduct sustainable investments also fell from 19% in 2019 to a mere 12% in 2020. However, the most revelatory finding of the survey is perhaps the acknowledgement by 60% of global institutional investors of greenwashing as the most significant obstacle to their sustainable investment intentions. 48% of surveyed investors also identified a lack of transparency and reported data as problematic, while 45% focused their concerns on financial performance.
Using Engagement to Tackle Greenwashing
“Investors are asking more from their asset managers when it comes to sustainability, and those demands are becoming increasingly sophisticated,” Andy Howard, Global Head of Sustainable Investments, Schroders, said. “We can help clients navigate the sustainable investment landscape and support them in achieving their objectives through proprietary tools like SustainEx, and drive positive impact through our engagement and voting activity. The evidence is consistently growing that sustainable investment and robust returns are not mutually exclusive.
“We welcome regulatory efforts to harness tangible action and help fight greenwashing,” he added. “This should support delivering real change and allow investors to make informed decisions. At the same time, it is also crucial that asset managers and investors do not feel overwhelmed by these growing demands and amount of sustainability information. We are working closely with industry initiatives, policymakers and regulators to strike the right balance.”
“Active ownership has become more important than ever,” Elly Irving, Head of Engagement, said. “Investors have a duty to hold companies accountable and an opportunity to drive positive change. It’s why Schroders has such a strong commitment to active ownership. By engaging with companies and using our voting rights, we can drive sustainable change to better meet the investment needs of our clients. As we close in on 100% integration across all of our assets, engagement is now an investor driven activity that’s prevalent across the whole firm.”
Image courtesy of Schroders