As sustainable investing continues to gain widespread acceptance among institutional investors, full integration is projected to surge in the next five years, according to a new study conducted by Coalition Greenwich and commissioned by AGF Investments.
It found nine in 10 institutional investors in North America and Europe expect to be investing sustainably or working toward the goal of introducing sustainable investment practices into their portfolios within the next five years.
In addition, implementing sustainable investing across portfolios with full integration is projected to grow to three-times today’s level in five years. Indeed, the majority of European (63 per cent) and North American (55 per cent) institutional investors predicted sustainability will be integrated across their entire portfolio within five years.
“It is important to hear directly from institutional investors and those in North America and Europe are clearly indicating that their interest in sustainable investing continues to grow,” said Karrie Van Belle, chief marketing and innovation officer at AGF Investments, in a press release.
Looking specifically at the priority themes most often targeted by institutional investing, the study found 34 per cent of respondents are focusing on the energy transition, followed by water services and climate adaption.
It also found institutional investors are looking to integrate sustainability across asset classes. However, the motivation behind adopting sustainable investing practices differed, with North American investors focused on improving risk-adjusted returns and European investors focused on creating positive impact.
“As sustainable investing gains widespread acceptance, certain common trends and best practices are beginning to emerge that could help make it easier for investors of all types to confidently adopt sustainable investment strategies,” said Todd Glickson, head of investment management for North America at Coalition Greenwich and author of the study, in the release.
Despite the rapid evolution of sustainable investing, the industry still faces some real headwinds to further growth, according to the study, which noted these include a lack of consensus on how to measure the impact of sustainable investments and continued uncertainty about regulation.
“As institutions continue to hone best practices, the industry and global regulators must come together to create a solid and reliable framework to support the continued growth and evolution of sustainable investing,” said Glickson.