The impact of the global pandemic has sharpened investors’ focus on environmental and social issues despite calls for greater sustainability-focused performance data, the Schroders Global Investor Study has found.
The sustainability-focused findings of our flagship study, which surveyed over 23,000 people from 33 locations globally, found that 57% and 55% of investors respectively are now placing greater importance on social and environmental issues. Interestingly, the focus on delivering higher returns had fallen compared with a year ago.
However, more than half (53%) of investors still believe that data/evidence demonstrating that investing sustainably delivers better returns would encourage them to increase their allocations.
A further 40% of investors said that regular reporting highlighting the impact their investments are having would motivate them to increase their sustainable investments and, just over a third (36%), would like to see some form of self-certification from the investment manager that their investments are sustainable.
The bulk of investors globally are at ease with the prospect of embracing sustainability, with 57% stating they would feel positive about moving to an entirely sustainable portfolio, so long as the same level of risk and diversification was maintained, with younger people (60%) particularly open to this move.
Indeed, 52% of investors globally said the environmental impact of investing sustainably was the most appealing factor, ahead of 39% citing the alignment with their societal principles. And 38% now believe they offer scope for greater returns.
Andy Howard, Global Head of Sustainable Investments, Schroders, commented:
“These findings have laid bare the growing expectations now being placed on asset managers when it comes to addressing climate change. We are focusing on ensuring the investments we manage for our clients are aligned to the transition toward a more sustainable planet, and benefit from the opportunities that transition will bring.
“As investors and guardians of our clients’ assets, we seek to actively influence corporate behaviours so that the companies in which we invest are sustainable and resilient.
“At the same time, despite this greater profile for asset managers, there is still clearly more to be done to demonstrate to investors that a sustainable focus does not have to compromise returns. Indeed, we see sustainable value creation as intrinsically linked to successfully navigating social and environmental challenges.
“We need to ensure we give our clients the information they need to assess our performance across the areas that matter to them. At Schroders we are taking these findings very seriously. We have a responsibility to show leadership on key sustainability issues and how we are meeting our clients’ evolving needs in this area.”
The study also asked what controversies would drive people to withdraw from investments. Financial scandals are the most likely, with these issues creating greater investment obstacles than cyber security hacks or climate change catastrophes. Some 65% of investors stated they would sell out if their investments were impacted by financial or accounting scandals.
This was ahead of 61% of investors who cited cyber hacks and 60% that had identified a climate change catastrophe as reasons for divestment. Interestingly, compared with their European counterparts, people in Asia and the Americas were the most sensitive to financial scandals.
People in the Americas were more likely to divest as a result of climate change challenges compared with investors globally.
Investors are also increasingly expecting global action to be taken to address climate change. The study found that pressure was growing on almost all key global stakeholders – from governments, companies and even asset managers – to mitigate the impact.
Almost three-quarters of people (74%) agreed that this responsibility should fall on the shoulders of national governments and regulators, while over two-thirds (68%) placed responsibility on companies for tackling climate change. However, the biggest change in sentiment over the past four years has been the growing role expected of asset managers.
Some 53% of investors believe investment managers and major shareholders are responsible for mitigating climate change, substantially up from 46% in 2017.
Please click here to read the report ‘Sustainable investing: where profit meets purpose’ to view the findings in full detail.