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Responsible Investing is gaining popularity among institutional investors

By The IJ Staff | June 12 2018 01:30PM

Photo: Freepik

A new survey by Aon released today shows “a dramatic upsurge” in the number of institutional investors who are interested in responsible investing initiatives.

The 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 (RI) to be important to their organization to some degree, says Aon.

The study revealed that 40 per cent have already developed an RI policy for use in making investment decisions, and another 14 percent are in the process of developing a policy.

Better investment decisions

Of those that have implemented an RI initiative within their organizations, the most popular reasons were: a belief that the incorporation of non-financial Environmental, Social and Governance (ESG) data resulted in better investment decisions (39 percent) and a desire to impact certain global issues, such as the carbon footprint, climate change and water issues (26 percent), found Aon.

“While responsible investing is still relatively nascent in many organizations and geographies, overall interest in these initiatives has skyrocketed over the past few years,” said Meredith Jones, partner & head of Emerging Manager Research at Aon. “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.”

Standardization and better ROI measures needed

Jones, added however, that more needs to be done before there will be widespread global adoption.

When asked what would make responsible investing more accessible, the majority of respondents cited standardization and better ROI measures: better or more consistent data on ESG factors (53 per cent); compelling research on return profiles (50 per cent); industry agreement on terms and definitions (49 per cent); agreement on key ESG factors (49 per cent).

Canada more engaged than the U.S.

Aon’s survey found a geographic split in attitudes towards RI, with noticeably more activity in the EU, and particularly the UK, than in the US. “Canada, meanwhile, falls in between – less engaged in RI than the UK and EU, but substantively more active than the US,” says Aon.

For example, in the US no investors said that they would withdraw from a fund manager who lacked an RI policy; whereas five per cent of Canadian respondents and 11 per cent of UK investors said they would do so, revealed the survey.

“RI is one of the most talked-about subjects among institutional investors in Canada, particularly endowments, foundations and others with a public interest mission, but we’re seeing more engagement among large corporate investors as well,” says Calum Mackenzie, Partner, Investment Consulting, Aon.

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