Market view

Sustainability value on the rise

57% of investors worldwide are comfortable with the prospect of a transition to a fully sustainable portfolio. Photo: Shutterstock

57% of investors worldwide are comfortable with the prospect of a transition to a fully sustainable portfolio. Photo: Shutterstock

The pandemic has increased the importance investors place on sustainability issues despite uncertainties about performance, according to Schroders' Global Investor Study 2021. For the international group, the role of asset managers on these issues is becoming more important.

In a sample of 23,950 investors based in 33 jurisdictions around the world, 57% of those surveyed said they were more comfortable with social issues and 55% with environmental issues since the pandemic. This has come at the expense of generating returns, which has declined in importance in the eyes of investors compared to the 2020 edition of the survey.

However, more than half (53%) of investors still say that evidence that sustainable investing generates better returns would lead them to increase their allocation. 40% of investors said that regular reporting, highlighting the impact of their investments, would encourage them to increase their sustainable investments and just over a third (36%) would like to see some form of self-certification by the management company that their investments are sustainable.

Transition to a 100% sustainable portfolio

Regarding the prospect of transitioning to a fully sustainable portfolio, 57% of investors worldwide are prepared to follow that path if the level of risk and diversification is the same as that of a conventional portfolio. Young people are the most open to this transition, with 60% of their responses being positive.

The environmental impact of sustainable investment is the most attractive factor for 52% of investors worldwide, compared to 39% who cite alignment with their societal principles.

In addition to that, 38% of respondents believe that sustainable investments offer a higher return potential.

The survey also asked what controversies would cause investors to divest from a 'sustainable' investment.

Financial scandals were the most cited reason (65%), followed by cyber-attacks and data breaches (61%), climate change disasters (60%) and human rights abuses (59%), a scandal related to the treatment of company staff (56%) or a scandal related to internal culture (49%).

The study points out that, compared to their European counterparts, investors in Asia and the Americas are more sensitive to financial scandals. US investors were also found to be more likely to divest due to climate change challenges than investors worldwide.

Pressure on asset managers

There is also a growing consensus among investors that global action is needed to tackle climate change. The survey reveals that pressure is mounting on almost all key stakeholders--governments, companies and even asset managers--to mitigate the impact.

For 74% of investors this responsibility should lie with national governments and regulators, while 68% placed the responsibility for tackling climate change on companies, on a par with international organisations.

However, the main change in views over the past four years is the expected growing role of asset managers. 53% of investors believe that asset managers and major shareholders are responsible for climate change mitigation, up from 46% in 2017.

The full Schroders Global Investor Survey 2021 can be found here.

This story was first published in French on Paperjam. It has been translated and edited for Delano.