Investors are increasing environmental, social and governance (ESG) investments in line with the UN’s sustainable development goals (SDGs) framework, according to a study by BNP Paribas Securities Services (BNPP SS).
The French bank carried out a survey of asset managers and owners incorporating ESG strategies finding that over 65% of the 347 respondents were boosting investments in this field.
“ESG investment is becoming increasingly important for investors, and our survey highlights investors’ appetite to pursue both purpose and performance,” said Florence Fontan, head of asset owners at BNPP SS.
“However, practical integration has its challenges due to data and technology barriers, and deep ESG investment is still finding its feet. The next two years will be critical to achieving the right investment mix, technology and skills in place.”
Although data and technology costs remain barriers to ESG integration, “investors are optimistic”, BNPP SS says. By 2021, over 90% of respondents predict they will allocate more than 25% of their funds to ESG.
With 75% of asset owners and 62% of asset managers holding 25% or more of their investments in funds incorporating ESG, there is a stronger commitment to this investment strategy compared to 2017 (48% and 53% respectively).
Another key finding of the ‘ESG Global Survey 2019’ is that UN SDGs are a “new compass” for investors. Sixty-five per cent of respondents “align their investment framework with the SDGs, mainly by setting SDG-related revenue targets for investee companies,” according to the study.
One of the top three reasons for ESG investment is “improved long-term returns” for just over half of respondents, while 60% expect their ESG portfolios to outperform over the coming five years.
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