Institutional investors in Asia and Europe are at the forefront of adopting environmental, social and governance investment strategies, while North America lags behind, according to a survey by Coalition Greenwich.
Globally, the survey found 75 per cent of investors incorporate ESG strategies, with Europe leading at 92 per cent followed by Asia at 76 per cent. However, North America trails at 53 per cent, driven mainly by Canadian investors.
While institutional investors’ ESG considerations differed across regions, the top objective for using ESG was to make a positive impact on society, particularly the environment. Specifically, European investors are focusing on climate change and carbon emissions, while North Americans are emphasizing diversity and inclusion and Asians are prioritizing business ethics.
The survey also found net-zero targets have gained traction, with 15 per cent of institutional investors globally setting such targets and around a quarter of European investors adopting them. In contrast, only five per cent of North American investors have implemented net-zero targets.
In addition, ESG knowledge is a crucial factor in selecting investment managers, according to the survey, which noted Asian and European investors are considering it early on. However, only six per cent of managers are excelling in communicating and providing evidence of ESG performance, while nearly 40 per cent are considered “good.”
Looking ahead, about 70 per cent of large institutional investors said they plan to increase ESG integration in their allocations, especially in equities and fixed income. Additionally, more than half of current ESG investors said they expect to change investment managers on more than 10 per cent of their portfolios in the next five years, with the trend led by Asia and Europe.