Research reveals growth drivers and regional differences in ESG investing
a recent survey by Macquarie Infrastructure and Real Assets (MIRA) clearly shows a growing interest in ESG among professional asset managers. The MIRA survey summarizes responses from 150 real asset investors, representing more than $20 trillion in assets worldwide. Some of the key findings include a growing interest in sustainable investing, a strong belief that an ESG strategy can improve returns, and some revealing regional differences in the resources and attention managers devote to ESG.
More attention to ESG
The MIRA survey shows that investors are increasingly focusing on ESG and plan to continue doing so. 58% of investors say they have increased their ESG focus over the past five years, while an impressive 91% expect it to increase even further over the next five years. Some investors expect a long-term convergence between ESG and traditional investing, as explained by one survey respondent:
“There will be even less of a gap between “traditional” financial matters and ESG matters. They will become increasingly intertwined, with one key driver being the need to invest in solutions for climate change and solutions for the Sustainable Development Goals, for example.”
Better returns with ESG
Most survey respondents believe that incorporating ESG considerations can improve investment performance. 78% support the statement that having a good sustainability strategy improves returns, although 21% indicate that this can even sacrifice returns. Despite this result, almost two-thirds of respondents indicated that they are not yet actively using ESG assessment in their decision-making.
Exclusionary and active ESG strategies
Investors responding to the survey noted the use of both exclusionary strategies (such as avoiding specific companies or sectors) and active strategies (allocating resources to sectors that deliver ESG benefits). The most common categories for exclusion included weapons and defense, labor and human rights violations, and environmental violations. The most common actively pursued ESG themes are renewable energy, environmental impact and social impact.
One of the most interesting findings from the research is the contrast between regions in the resources and attention companies devote to ESG. 72% of respondents from EMEA and 71% from Australia reported having a dedicated ESG function in their company, compared to just 24% of respondents in the Americas and 21% in Asia. Similarly, 74% of EMEA investors and 95% in Australia said they have an ESG policy, while only 48% in the Americas and 58% in Asia have one.
ESG growth engines
MIRA’s research not only showed that ESG-driven investing is growing, but also revealed some of the driving forces behind that growth. In the commentary section of the report discussing the research findings, MIRA indicated that one of the key reasons for the growth of ESG investing is increased risk perception, with investors becoming increasingly aware of their own reputations and brands, making them controversial avoid investments. . Other drivers include the belief that sustainable investing improves returns, government policies that promote sustainability and improved ESG disclosure, as well as a broader general awareness of environmental, social and governance issues.