Portfolios that integrate environmental, social and governance factors are likely to perform as well or better than non-ESG investments, say 90% of institutional investors.
The third global survey of 542 assets owners and investment consultants by RBC Global Asset Management showed that performance has become a key selling point for ESG-integrated strategies, with 38% of respondents believing that it helps to generate alpha. In the 2017 survey, 24% said they see ESG as a source of alpha. Also in 2018, 20% said they do not view ESG as a source of alpha, down from 46% in 2017. The remaining 42% of respondents said they are not sure about ESG’s value as an alpha source. The comparative figure for 2017 was 30%.
The survey also found that responsible investing is increasingly viewed as a fiduciary responsibility among investors, with 54% agreeing. RBC GAM said that figure was more than double the percentage who last year said it was a fiduciary duty.
European institutional investors lead the way when it comes to believing it is a duty to incorporate ESG factors into the investment approach, at 63.5%. That compared to 57.9% in Asia, 57.7% in Canada, 48% in the U.S. and 45.9% in the U.K. believing the incorporation of ESG is a duty.
When it comes to approaches taken to ESG, engagement remained the most popular method according to 45.1% of respondents, up from 43.3% last year. A further 17.7% think both engagement and divestment are equally effective, compared with 16.2% last year; 8.1% think divestment is the best approach, up from 6.3% last year; and 8.1% think neither approach is effective, down from 10.9% in last year’s survey. The remainder said they are not sure.
The survey also found that ESG goes beyond equities, which was the primary focus for 84% of institutional investors. However, 60% said ESG is also incorporated into fixed-income portfolios, 43% in real estate, 36% in infrastructure and 34% in alternative assets.
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