Investment - Articles - Institutional investors are split on responsible investing

A new survey from Aon says that regulatory changes, demographic shifts and the increased availability of quality data has prompted a dramatic upsurge in the number of institutional investors who are interested in exploring or implementing responsible investing initiatives.

 ‘Global perspectives on responsible investing’ - Aon’s survey of 223 institutional investors around the world — including endowments, foundations, public and corporate pensions and defined benefit plans — found that 68 percent consider responsible investing as important to some degree to their organisation. Of these, 40 percent have already developed a Responsible Investment (RI) policy for use in making investment decisions, and another 14 percent are in the process of developing a policy.

 Of those that have implemented an RI initiative within their organisation:
 • 39 percent said that they had done so due to a belief that the incorporation of Environmental, Social and Governance (ESG) data resulted in better investment decisions.
 • 26 percent said there was a desire to impact certain global issues, such as the carbon footprint, climate change and water issues.

 Meredith Jones, partner and head of Emerging Manager Research at Aon said: “While responsible investing is still relatively nascent in many organisations and geographies, overall interest in these initiatives has skyrocketed over the past few years. We’ve gone from clients asking sporadically about responsible investing to full-scale development of policies, implementation of responsible investing initiatives and a veritable sea change in how investors and asset managers incorporate and evaluate responsible investing data into their investment strategies.”

 Jones notes that while Aon expects to see interest in responsible investing continue to grow, more will need to be done before there will be widespread global adoption. This includes clarity about definitions, access to accurate data and measurement, concerns about performance, and regulatory pressure.

 When asked what would make responsible investing more accessible, the majority of survey respondents cited standardisation and better ROI measures:

 • Better or more consistent data on ESG factors – 53 percent
 • Compelling research on return profiles – 50 percent
 • Industry agreement on terms and definitions – 49 percent
 • Agreement on key ESG factors (materiality) – 49 percent

 Attitudes towards Responsible Investment vary by region

 Aon’s survey found that there is a geographic split when it comes to attitudes towards RI, with noticeably more activity in the UK and Continental Europe than in the US:

 John Belgrove, senior partner at Aon, said: “It was clear from the data that European investors are behind much of the drive towards Responsible Investment. We believe this is due in large part to strong governmental action and regulatory changes that push investors towards a more sustainable investment approach.”

 Tim Manuel, head of Responsible Investment in the UK at Aon, added: “We are seeing a willingness to embrace different RI strategies in the UK and across continental Europe. While negative screening is still well used, especially on the Continent, investors are modernising their approach, with ESG integration becoming their more popular way of implementing RI strategies.”

 • 47 percent of European investors have an RI policy in place, compared to just 30 percent of US investors.
 • Investors in Europe were the most likely to have dedicated RI staff (28 percent) and UK investors were most likely to withdraw from a manager with no RI policy in place (11 percent).
 • Survey respondents expect Europe to lead the RI charge going forward but were split on who might come in second. Interestingly, each geography picked itself as the RI ‘runner up’.
 • The most common type of RI implementation was ESG integration into investment strategies (47 percent). Negative screening, also known as Socially Responsible Investing (SRI), was a distant second at 24 percent. However, the SRI numbers were bolstered by strong uptake in Europe (40 percent). The other three geographies were less likely to use SRI as an RI tool. Impact Investing is used by 7 percent of those polled.
 • Investors in Europe are the most likely to be active owners of shareholder engagement (35 percent) while the US was the least likely (15 percent). In the UK, 20 percent of investors use shareholder engagement to express their RI policy, while almost 18 percent of Canadian investors do the same.

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