The percentage of global institutional investors implementing environmental, social and governance strategies continues to rise, reaching 72 per cent in 2020 according to a recent Natixis Investment Managers survey. That’s up from 64 per cent in 2019 and 61 per cent in 2018.
“I think it is a long-term trend rather than a flash in the pan,” says Dave Goodsell, executive director, Natixis Investment Managers’ Center for Investor Insight. “The assumption that everything’s a green bubble right now because there was a lot of attention last year is completely a false flag when you start to look at the fact that this has been a steady progression of adoption.”
While institutional investors’ primary reason for implementing ESG factors remained ensuring that assets better represent organizational values (consistent with 2019 and 2018), 75 per cent of those surveyed in 2020 said ESG factors are an integral part of sound investing.
Specifically, Goodsell says institutional investors are starting to look at ESG issues as a way to achieve risk management and identify alpha opportunities — a shift that’s likely to sustain institutional investors’ use of a range of tools that can achieve different ESG objectives.
In 2020, 48 per cent of institutional investors integrated ESG factor analysis into the overall investment process, 40 per cent used negative screening, 34 per cent employed active ownership, 34 per cent engaged in impact investing, and 28 per cent focused on thematic investing. All of those numbers were significantly higher than in 2019 and 2018.
Institutional investors, says Goodsell, “are starting to see [ESG strategies] as a way of really looking critically at the companies that they’re investing in, looking at the industries where there are opportunities, and really finding an investment rationale for this as well.”