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American institutional investors skeptical about ESG performance

By The IJ Staff | October 15 2020 12:30PM

Photo: Freepik

The adoption of environmental, social and governance (ESG) integration continues to grow globally – except in the United States, where institutional investors are becoming more skeptical of its performance merits, according to the 2020 RBC Global Asset Management Responsible Investment Survey.

Compared to 2019, there is an increase in the percentage of institutional investors who believe ESG integrated portfolios are likely to perform as well or better than non-ESG integrated portfolios in Canada (97.5% up from 90%), Europe (96% up from 92%) and Asia (93% up from 78%). But in the U.S., institutional investors are more skeptical of the performance of ESG integrated portfolios, as only 74% (down from 78% in 2019) believe they perform as well or better, and over a quarter of U.S. respondents (up from 22% in 2019) believe ESG integrated portfolios perform worse.

Pandemic influencing ESG views

The report also noted that COVID-19 is beginning to influence investors' views about ESG. While the importance placed on ESG considerations hasn't changed for the majority of investors, more than 28% said COVID-19 has made them place more importance on ESG considerations.

As well, 53% of investors are looking for companies to disclose more details about worker safety, employee health benefits, workplace culture and other social factors due to the pandemic.

Diversity, impact investing and climate-related solutions deemed important

Other key findings from the survey include:

  • Support for diversity and inclusion targets for corporate boards remains strong: During a time with renewed focus on Black Lives Matter and racial justice issues, more respondents favoured board minority diversity targets (44%) than opposed them (28%). Similarly, more respondents favoured board gender diversity targets (49%) than opposed them (26%).

  • Investors plan to focus more on impact investing: Some 40% of investors said they plan to allocate more money to impact investing products over the next one- to five years, an increase from the 28% who said the same a year ago.

  • Investors demand more climate-related investment solutions: When looking at different climate-related strategies, investors are most interested in the following renewables (55%), carbon neutral or low carbon strategies (54%), transition strategies (48%) and fossil fuel free strategies (36%).

  • Anti-corruption is a top concern: The RBC GAM survey asked respondents to rank which ESG issues they are concerned about when investing. Anti-corruption was ranked first globally, followed closely by climate change and shareholder rights, which tied for second.

 
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