A trio of surveys released recently have once again shone a light on investors’ increasing interest in skewing portfolios towards more responsibly invested holdings
Covid-19 fuels interest in ‘social’ considerations
BNP Paribas Asset Management (BNPP AM) has recently sponsored a study by Greenwich Associates (which surveyed 96 institutional investors and 22 intermediary distributors across UK, France, Germany, Italy, the Netherlands and Nordic countries) which found that 81% of respondents already take ESG considerations into account in all or part of their portfolios, with a further 16% planning to do so.
However, the Covid-19 crisis has highlighted a greater awareness of social considerations in investment decision-making; almost a quarter said ESG has become ‘more of a focus/more important’ as a result of the Covid-19 crisis, but most notably 70% also said social considerations – the ‘S’ of ‘ESG’ – will become extremely or very important as we move forward.
The most important elements were labour standards (38%), excluding harmful investments (31%), human capital management (23%) and gender equality (22%), with community involvement (11%) considered less important.
Frédéric Janbon, CEO of BNPP AM, said: “The Covid-19 crisis has clearly prompted a shift in investor perception of social factors, which are now widely seen as having a critical and positive impact on long-term value creation and risk mitigation. It has also highlighted the interconnection between the way in which companies approach social issues such as treatment of employees or addressing inequalities in their long-term sustainability strategy. We encourage companies to evolve and improve their social behaviour, thereby reducing risk and enhancing the sustainable returns.”
Furthermore, 88% of respondents said the ‘S’ criteria will have a greater impact on long-term performance versus 76% pre-crisis, and similarly 94% of respondents believe it will lead to better risk management compared to 74% per-crisis.
However, the investors also identified two clear barriers to investing with social considerations in the study. A lack of established or standard metrics was cited by 42% and lack of clarity over what socially responsible investment includes was highlighted by 31%.
Jane Ambachtsheer, global head of sustainability at BNPP AM, said while social factors are an extremely important component of companies’ ESG scores, they have often been perceived as less prominent.
“This can be attributed in part to the fact that the nature of social indicators can seem less tangible or measurable, with standards that are more likely to vary by region – however, the same can hold for environmental and governance factors.”
On the flip side, 37% of respondents saw ‘no barriers’ to investing with consideration to social factors.
Advisers’ interest in responsible funds continues to climb
Advisers in the UK are also continuing to increase their research on responsible investing funds, according to the latest quarterly Market Intelligence Report which captures viewing trends of users of Square Mile Investment Consulting and Research Academy of Funds over the second quarter of 2020.
Five of the top 20 funds view by advisers were responsibly invested with the Royal London Sustainable World Trust, run by Mike Fox, the third most viewed overall. Views of this fund were up 2.4% on the quarter to 13.9%, while Eden Tree Amity Short Dated Bond Fund, managed by Chris Hiorns and David Katimbo-Mugwanya, was also a significant mover in the top five responsible funds, increasing its share by 4.6% to 8.3% and putting it in third place after the First State Asia Focus fund. These funds were the tenth and sixth most viewed funds overall.
Meanwhile, Artemis – which recently hired Kames Capital’s sustainable global equity team in June – was the most viewed group on the Academy of Funds.
James Glover, chief operating officer at Square Mile, said responsible Investing is now at the forefront of many investors’ minds, partly as a result of the high-profile media coverage that it has received in recent years.
“It is also driven by other factors, such as the need and desire for investors to educate themselves and their clients about responsible investing and to understand what it means for them. Recent months have seen the valuations of high-profile companies being negatively impacted by ESG factors such as the oil majors and Boohoo.
“This increases awareness among fund managers of their fiduciary responsibilities and of their clients’ wishes that their money is invested in a way that is not just avoiding damaging the world we live in but also trying to improve it.”
Responsible investing improves reputations of the wealthy
Responsible investing can improve the personal reputation of wealthy families, investors and entrepreneurs, according to a survey commissioned by communications agency Transmission Private.
It found that three quarters of the UK public would think more positively of a well-known billionaire if it was reported in the press or elsewhere that they had chosen to avoid investing in controversial industries, such as weapons, gambling, fossil fuels and tobacco.
The agency said while wealthy people and families have consciously steered clear of these so-called ‘dirty industries’ for some time, they have not communicated this to partners, employees and the public.
As many wealthy financiers, business owners and family offices look at ways to safeguard their reputations amid widespread criticism during the course of the Covid-19 pandemic, now is a good time to shine a light on their responsible investing efforts, the agency said.
Luke Thompson, partner at Transmission Private, commented: “Many successful families have taken a positive and proactive stance on responsible investment for years now; they have been the real leaders in this field over the last few decades and beyond.
“Yet while they were the first out of the gate, they have always been reserved about communicating this family choice. Many families and successful individuals have worried that it may look like they are either seeking attention or, even worse, that their altruistic and authentic choices will be mischaracterised as cynical gestures.
“These new survey results now firmly put that to bed.”
Communicating a responsible investing stance would be particularly popular among younger people and females, the survey found, with 78.5% of all respondents between the ages of 18 and 24 indicating that screening out ‘dirty industries’ would positively change their perceptions of a well-known billionaire – this compares with only 68.2% of over 55-year-olds thought the same. Furthermore, 79.5% of women said it would positively change their opinions of that same billionaire versus only 66% of men.
“As the priorities of different generations change, business owners should expect themselves to be judged differently,” Thompson said.
“We have seen younger people are increasingly concerned about climate change, sustainability and workplace well-being. As standards change, business owners need to respond positively to these expectations.”
The poll was conducted by OnePoll, and covered a nationally representative sample of 2,000 people.
