Investors believe ESG will outperform

An environmental, social and governance (ESG) survey from bfinance has shown investors believe ESG will outperform in the next three years.

In the survey, 82% expected ESG to outperform with 35% strongly agreeing, and these expectations become firmer over a 20-year horizon.

A third of investors said the pandemic had increased their focus on ESG issues, while “carbon foot-printing” had surged with only 21% of investors “not actively considering” how to implement it portfolio-wide.

However, 84% of investors cited inconsistent reporting across asset managers and classes as a key challenge.

More than 90% of investors said that ESG criteria was important to them when selecting external asset managers and 76% said they had a stricter ESG criteria for manager selection than they did three years ago.

The survey consisted of 256 senior staff at pension schemes, foundations, insurance firms, endowments, family officers and other asset owners that represented a combined US$7 billion ($8.9 billion).

Daniele Goldberg, director of client consulting for bfinance in Australia, said ESG was clearly a focus for Australian investors with 96% of Australian respondents agreeing that ESG considerations were of high or moderate importance to their investment strategy. 

“There’s long been a concern that the focus on ESG would be impacted by a market downturn,” Goldberg said.

“But the recent pandemic has shown this to be the opposite. In Australia, Covid-19 has clearly accelerated the focus on ESG with over 45% of Australian investors saying the pandemic has affected their investment team’s focus on ESG issues.”

Kathryn Saklatvala, head of investment content for bfinance, said the results showed the increased breadth, depth and complexity of ESG implementation as investors looked to take a more consistent, portfolio-wide, data-grounded and impact-minded approach.

“Yet the advancement also brings challenges: investors with increasingly clear objectives and priorities in this space are even more frustrated by the lack of clear, consistent, standardised data on many of the key issues,” Saklatvala said.