North American investors closer to falling in line with global counterparts on ESG: survey

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Environmental protection concept with glass globe in hand © Levente Gyori /123RF Stock PhotosNorth American institutional investors are catching up to other global regions in their interest in sustainable investing, according to a new survey by FTSE Russell.

Nearly half (42 per cent) of North American asset owners surveyed before the coronavirus pandemic said they’re interested in sustainable investing, up from just 17 per cent in 2019. This remains a notable lag when compared to investors in Europe, the Middle East and Africa, with 81 per cent saying they’re interested this year, up from 73 per cent in 2019.

Larger asset owners, managing US$10 billion or more, were more likely to express interest, with 80 per cent either already using sustainability factors in their investment strategy or evaluating doing so. However, 65 per cent of asset owners managing less than US$10 billion said the same.

More complex sustainable or environmental, social and governance strategies are gaining ground. Interest in sophisticated approaches like re-weighting based on sustainability or ESG factors grew among asset owners to 55 per cent in 2020, from 36 per cent in 2019, while basic strategies like negative screening became less popular, dropping to 48 per cent from 64 per cent.

For specific asset classes, fixed income has traditionally lagged behind its equity counterparts in areas of sustainability implementation. However, this year’s survey found 75 per cent of EMEA institutional investors said they’re already, or considering, implementing sustainability strategies for the asset class. Less than half (45 per cent) of North American asset owners said the same.

Globally, about a third of survey respondents said they’re considering or currently implementing ESG or sustainability initiatives for multi-asset investments. Just 10 per cent said so of commodities and six per cent of currencies.

There’s also increasing interest in combining sustainability with smart beta strategies. Up from 73 per cent in 2019, 81 per cent of asset owners in EMEA using or evaluating smart beta said they expect to apply ESG considerations to the strategy. Less than half (42 per cent) of North American respondents said the same, but that’s up significantly from 17 per cent in 2019.

“Climate/carbon tops the list of sustainability themes that appear to be a focus at 64 per cent, with environmental considerations close behind at 59 per cent,” said the survey. “Governance and social themes are also widely considered, with over half of respondents indicating such.”

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