Two-thirds of institutional investors incorporate environmental, social and governance (ESG) considerations as part of their investment approach, and one quarter expect to increase their allocation to managers with ESG-based investment strategies within one year, says a global survey by RBC Global Asset Management (RBC GAM).
In an announcement issued Oct. 31, RBC GAM says that while these results “suggest that responsible investing has moved into the mainstream, the survey also reveals how investors' perceptions differ starkly by region; when it comes to ESG investing there are differences between investors in Canada and their counterparts in the U.S. and Europe.”
Sharp differences among institutional investors
The survey revealed sharp differences among institutional investors as to whether ESG analysis can mitigate risk and drive alpha in a portfolio. “Some institutions plan to increase their exposure to ESG strategies in the near term while others are holding back, unconvinced of its value and unimpressed with available data about corporate performance on ESG,” observes RBC GAM.
"Globally, we are seeing a clear trend toward greater awareness, interest and adoption of ESG analysis and responsible investing," said Judy Cotte, Vice-President and Head of Corporate Governance and Responsible Investment at RBC GAM. "This survey reveals that many institutional investors are actively discussing these issues within their organizations and with consultants and stakeholders. And while some institutions are moving at a cautious pace, others are moving rapidly to adopt an ESG-based investment approach."
The survey revealed that 73 per cent of Canadian respondents currently utilize ESG-based investment approaches "significantly" or "somewhat". This is much closer to the adoption level in Europe (84 per cent) than in the U.S. (49 per cent).
"In Canada as in the U.S. and Europe, the most common question investment consultants are asked by clients about ESG is whether an ESG-based approach will negatively impact investment performance," said Andrew Sweeney, Institutional Portfolio Manager at RBC GAM. "This and other data from the survey reveal a high level of interest and curiosity about responsible investing, including areas of significant uncertainty. In today's market, asset managers have an opportunity to utilize ESG analysis as they compete to add value for investors."