Alpha Can Be Found in ESG Investing
Environmental, Social and Governance considerations are playing an increasingly dominant role in institutions’ investment strategies, according to a survey by Naxtixis Investment Management.
Over half (63 percent in Asia) of the 500 institutional investors surveyed by Natixis agree there is alpha to be found in Environmental, Social and Governance (ESG) investing.
«Globally, 43 percent of investors (52 percent in Asia) identify ESG factors as just as important as fundamental financial factors when analysing a company, and a fifth (14 percent in Asia) see it as an important way to generate risk-adjusted returns over the long term,» said Natixis Investment Management in a press release.
Allocations to Increase
Currently, three in five institutional investors currently incorporate ESG factors, and more than half (55 percent globally, 58 percent in Asia) said they expect to increase allocations to ESG strategies in 2019, with return generation and diversification key considerations.
According to data from «Bloomberg», growth in ESG assets and funds have increased by 37 percent in 2017. Pension funds, who have long-term investment horizons and millennials, who are more aware of environmental impact of businesses, have driven the demand.
Still Not Part of Fiduciary Duty
Despite the increasing appetite for ESG strategies, there remains a big bulk of investors unwilling to integrate sustainability issues in their investment practice. Many cited fiduciary duties as a barrier for doing so, noted Fiona Reynolds, chief executive of the UN-supported Principles for Responsible Investment in a recent speech at the G20 meeting.
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