Investors are increasingly allocating capital to specific themes or regions to help identify opportunities for impact and alpha, and focus their expertise on generating better outcomes, according to the fifth edition of BNP Paribas’ biennial ESG study.
The study – Industry Survey: Institutional Investors Leading the Way – captures the views of 420 asset owners, asset managers and private capital firms, representing $33.8trn assets under management.
Also read: Investor interest in energy transition and decarbonisation ‘rapidly expanding’ across asset classes
Based on the survey’s key characteristics framework, 19% of respondents were identified as ‘pacesetters’ – the more advanced type of investors in sustainable investing. These leaders are putting much greater emphasis on portfolio decarbonisation (95%), social issues (94%), just transition (68%) and biodiversity (86%) in their investment strategy.
In particular, private capital managers are deepening their involvement as they recognise the opportunities around the shift to a low-carbon economy, the study found.
Key findings
Most respondents (87%) stated that their ESG and sustainability objectives remain unchanged, while 84% believe the pace of sustainability progress will either continue or accelerate between now and 2030. Despite this, a lower level of advocacy is leading 41% of respondents toward a more reserved approach in communicating their process and achievements.
As many as 85% of respondents say they integrate sustainability-related criteria into their investment decisions, with 59% performing thematic investing. The top three primary objectives for respondents over the next two years were increasing allocations to energy transition assets (49%); using active ownership to advance their ESG goals (47%); and investing in low-carbon assets while divesting from carbon-intensive assets (46%).
Meanwhile, most private capital managers said they believe ESG investing can add value, improve alignment with asset owners, satisfy their stakeholders and enable them to benefit from investment themes around decarbonisation. 51% of the responding private capital managers expect to use active ownership to fulfil their ESG goals and are placing more emphasis on social issues (76%) and just transition (63%).
To support their aim to access and generate reliable ESG data, nearly half of investors (48%) anticipate allocating more budget to their sustainable investment strategy on ESG data acquisition and analysis.
