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    Investors Continue to See ESG Outperformance

    Stockholm (NordSIP) – According to a survey conducted by The Economist Intelligence Unit (EIU) and commissioned by UBS, ESG tops the agenda for global institutional investors. The new study “Resetting the agenda – How ESG is shaping our future” finds that 74% of respondents agree that their ESG-integrated investments had better financial performance than their equivalent traditional investments in the three years prior to 2020.

    The survey respondents include 450 investors from North America, Europe and Asia-Pacific working in asset and wealth management firms, corporate pension funds, endowment funds, family offices, government agencies, hedge funds, insurance companies, pension funds, sovereign wealth funds and reinsurers.

    North American investors appear to be ahead of their counterparts in other regions in terms of ESG integration, with 41% of them reporting to have at least 50% of their assets under management currently integrating ESG criteria, compared with a quarter in Asia-Pacific and just 18% in Europe.

    The COVID-19 Effect

    Since the beginning of 2020, the drivers for further ESG integration are expected to have shifted in the light of the wide-ranging impacts of the Covid-19 pandemic. Enhanced returns are a top-three driver, but mitigation of the downturn induced by the Covid-19 recession, cited by 26% percent of respondents, ranks number one on the list. Three-quarters of investors agreed that the pandemic has accelerated their interest in ESG and, unsurprisingly, inflows into sustainable investments are expected to continue gathering pace in the next three to five years.

    “The silver lining of the Covid-19 pandemic is the opportunity that investors have been given to reset their agenda. Our research shows that the importance of integrating ESG factors into investment decisions is now well understood. Investors are increasingly developing methodologies to assess non-financial performance, aligning with impact frameworks such as the UN SDGs, and proactively engaging with companies to implement positive change. This shift towards sustainable finance is supporting a better future for people and planet,” Candice de Monts-Petit, Senior Editor, The Economist Intelligence Unit says.

    Different Themes

    In terms of ESG factors considered, small regional differences are seen – investors in Asia-Pacific ranked social issues (53%) higher than the other regions, and those in North America ranked environmental (60%) and governance (61%) factors higher.

    Concerns around the sustainability agenda are reflected in the investment themes that survey respondents said that they are looking to invest in. Of the top five, four are related to the environment – renewable energy and energy efficiency, climate change adaptation and mitigation, pollution prevention and control, and sustainable water and wastewater management.

    “Our clients take ESG seriously in their decision making, and sustainable investing is no longer a ‘nice to have’, but a ‘must have’. The results of this latest survey shows that ESG is both a new performance marker and a growth driver in this environment, and institutional investors are using ESG to make better investment decisions and to assess their own performance. We will continue to support our clients in their drive to integrate sustainability factors into their investment portfolios,” Suni Harford, President UBS Asset Management, says.

     

    Filipe Albuquerque
    Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

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