Environmental, social and governance (ESG) criteria are of increasing importance to the decision-making process when looking to invest in real assets, a study has found.
As demand for real assets continues to grow against a backdrop of ongoing macro and political concerns, 90% of institutional investors said ESG was an important factor, according to the report by Aviva Investors that canvassed 500 insurance and pension fund investment decision-makers.
A lack of data, however, makes integration complex, according to the firm’s chief investment officer for its real assets business, Mark Versey.
“The growing influence of ESG is another undeniable trend, however the lack of readily-available information can create difficulties in quantifying the ESG credentials of a project,” he said.
Despite this, out of those who believe ESG is important to decision-making, 40% of insurers and 42% of pension funds consider a “favourable ESG impact” of real assets to be integral.
Institutional investors expect to increase allocations to real assets over the next 12 months, regardless of the challenging political and economic environment.
Over 50% in the insurance sector and just under 40% of pension funds executives said they expect their real assets investments to increase.
As global growth uncertainty reigns, with interest rates likely to remain lower for longer, institutional investors continue to look at private assets for diversification and potential illiquidity premium over public markets.
“Strong appetite for real assets is unsurprising given the continued global backdrop of political and economic uncertainty,” Versey said.
Escalating trade wars were also found to be a concern to real asset investments over the next 12 months, as well as the lack of clarity over the future relationship between the UK and European Union.
Read Funds Europe’s latest ESG report online here.
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