Institutional investors using a mix of strategies to tackle sustainability concerns

The majority (70 per cent) of global institutional investors agree that sustainability will play a more important role in investments over the next five years, according to a new survey by Schroders.

The survey, which polled 650 investors responsible for US$25.4 trillion under management, found this response was most prevalent in Europe (84 per cent) and Asia Pacific (67 per cent). The percentage of investors that disagreed has dropped, from 22 per cent in 2017 to just 15 per cent today.

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Specifically, climate change has overtaken all other areas of engagement, beating out businesses’ corporate strategies. Among North American investors, increased access to performance data (67 per cent) and improved benchmarks (43 per cent) were also key factors for helping to raise allocations to sustainable investments over the long term.

“Equities are considered the most suitable asset class for implementing sustainability, followed by infrastructure and credit,” noted the survey.

Overall, institutional investors are taking a blended approach to tackling sustainability. Sub-categorizing by region, the survey found more than 50 per cent of investors in North America, Latin America, Asia Pacific and Europe use negative screening tools. Positive screening tools are slightly less popular, with European investors (51 per cent) favouring them the most. Active ownership and engagement were most popular among North American investors (44 per cent), while investors in Asia Pacific (46 per cent) were most likely to use thematic investing.

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