Socially responsible investment has improved the returns for many institutional investors and helped them manage volatility, research has found.
However, take up of environmental, social and governance (ESG) investing remains low, with the research revealing that 40% of investors in Europe had between a quarter and up to nearly a half of their investments managed along socially responsible lines.
State Street Global Advisors (SSGA) carried out a global survey of 475 institutions and found 68% – or 323 investors – said the integration of an ESG strategy had “significantly improved returns” and nearly 70% said ESG had helped them manage volatility.
SSGA said the findings showed the adoption of ESG-driven investment strategies had a future in institutional portfolios.
Other findings included:
- 77% said ESG factors played a role in a public company’s broader financial performance.
- The proportion of ESG investments by adopters could grow over the next two years to around 40% of portfolios.
- 84% of respondents were satisfied or very satisfied with the financial performance of their ESG strategy.
But nearly two-thirds of respondents said benchmarking performance against peers was difficult and 56% said the accurate assessment of external ESG asset managers was a key issue.
Nearly half of asset owners also said fees and expenses were the main barriers to further incorporating ESG into portfolios, followed by a lack of internal knowledge on the matter.
SSGA hailed the findings as positive.
“There’s a collective shift in the institutional investment world right now that has asset owners and managers thinking differently about the full implications of their investments,” said Chris McKnett, head of global ESG business at SSGA.
The respondents represented assets under management $2.47 trillion (€2.26 trillion).
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