A study on investment management professionals in various sectors, including Life Insurers, London Markets (re)insurers, and investment managers, has revealed mounting worries about greenwashing amidst tightening ESG standards.
According to the study by Ortec Finance, a provider of risk and return management solutions for financial services companies, nearly half of respondents (45%) express significant worry about the current level of greenwashing in investment practices, with an additional 53% indicating some level of concern.
In response to these concerns, institutions said they are planning to increase their allocations to green bonds and specialist climate-focused funds over the next two years. Specifically, 62% of respondents said they intend to boost allocations to green bonds, while 75% plan to increase investments in specialist climate-focused funds.
According to the researchers, this shift reflects a growing recognition of the importance of sustainable investing practices in mitigating environmental risks and promoting long-term financial stability. However, there is apprehension among industry professionals regarding the future accessibility of investment opportunities.
Approximately 80% of respondents anticipate a reduction in the range of investments available to insurers due to increasingly stringent ESG requirements, underscoring the challenges of balancing investment strategies with regulatory demands and sustainability goals.
According to the study, only 18% of respondents believe that the industry as a whole has very good ESG strategies and programs in place. This scepticism extends to individual organisations, with just 21% expressing confidence in the ESG strategies and programs implemented within their companies.
Hamish Bailey, managing director UK, and head of insurance and investment, said: “Insurers increasingly need support in identifying investment opportunities which deliver for their institution and meet ESG requirements, which means a tougher focus on greenwashing.”
