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Responsible Investment: Surveys reveal trends in Europe and North America

  • Quality of Sustainability Reporting Slammed

  • Uncertainty about ESG Risks

  • Exclusion remains dominant theme in Europe

The sustainable and responsible investment sector continues to grow and evolve across Europe according to the latest survey by Eurosif while a survey by RBC Global Asset Management in the US found that more capital than ever is being put into environmental, social and governance – biased (ESG)  investment even while some investors are unsure they will produce superior returns.

RBC Global Asset Management found that less than a third (30%) of respondents said they considered ESG investing a source of  producing above average returns despite a growing body of research concluding that various responsible-investing factors do in fact improve financial returns.

Robert Eccles, chairman of Arabesque Partners, writing in the foreword of the Eurosif study highlighted the continued differences between countries and markets about the terms associated with sustainable investment and corporate responsibility. Eccles suggested that the most important issue for him was whether investors think ESG issues (the material ones, not all of them) were important for investment decisions.

He stated that: “While there is mounting evidence that they are related to performance, this is still a decision that ultimately rests with fund fiduciaries.”

Evidence shows that responsible investment boosts returns

Evidence shows that responsible investment boosts returns

Meanwhile the majority of respondents of the RBC survey, 40%, do not think of ESG as a risk mitigator,  which RBC said reflected a broader uncertainty about ESG’s ability to mitigate risk. Meanwhile, Flavia Micilotta, Eurosif executive director and Will Oulton president of Eurosif indicated in their foreword to the European survey  that one of the most important events to call for more sustainable finance and investments in general were the words of Mark Carney, chairman of the Bank of England and the Financial Stability Board, about the financial stability risks derived from climate change.

Sustainability reporting disclosure quality slammed

The RBC  survey also found that just 17% of survey respondents were satisfied with the quality and quantity of ESG-related data companies are making available. Conversely, 43% of participants indicated that they were somewhat or completely dissatisfied.

At the same time RBC found that a majority (52%) of ESG investors and professionals considered negative screens a niche responsible investment tactic, to be used only by mission-specific investors. However, investors are taking the Fossil Fuel Free movement seriously, the survey found with only 26% of respondents considering the movement to be a fad, and  62% considering it a lasting investment issue.

Exclusion is EU’s dominant responsible investment theme

However, the Eurosif survey found that exclusions remain the dominant responsible investment strategy in Europe at over €10 trillion, covering 48% of the total of European professionally managed assets. Meanwhile, impact investing was once again confirmed as the fastest growing strategy with a growth of 385%. Although the growth remains small in terms of assets, it has made impact investing, once more, the most dynamic and definitely the most promising approach for investors. Norms-based screening is the second biggest ESG approach with over €5 trillion in AuM and a steady growth rate of 40%, demonstrating a sustained growth per annum of 31% since 2009.

The Eurosif survey had responses from 278 asset managers and asset owners with combined assets under management (AuM) of € 15 trillion, representing market coverage of 81%. The RBC research was conducted through an online poll with 1,000 asset owners, wealth managers and pension plan consultants being contacted. This resulted in 90 responses

What do you think?