As the global economy experienced an 18-month run of shutdowns, lockdowns, and supply chain disruptions, ESG investing has racked up impressive numbers.
Record sales in the fourth quarter of 2020 totalled $152bn, and total assets invested worldwide reached $1.6tn according to Morningstar. By the fourth quarter of 2021 ESG strategies were on a winning streak in which the S&P 500 ESG index outperformed the S&P 500 by 3.7% for the three years ending 3 October 2021.
A survey conducted by Natixis Investment Managers showed that 22% of individual investors in Asia and Europe have ESG investments. Surprisingly, with 32% US investors owning ESG assets, only 16% Canadians reported doing so.
While one in five globally (21%) have made investments in ESG, there are more than twice as many investors who say they are interested (49%).
Just over half of those in Asia say they’re interested, including 58% in Hong Kong and 56% in Taiwan. Interest runs slightly behind in Europe (45%). While North America may have the largest number who have already invested, it’s where the smallest number (39%) say they are interested.
“In Asia demand for ESG is coming from all segments of investors in all the markets in which we operate, it’s a daily conversation now,” Fabrice Chemouny, head of Asia Pacific for Natixis Investment Managers, told FSA.
Natixis surveyed 8,550 investors globally across 24 countries in March and April 2021, with the goal of understanding their views on the markets and investing. An online quantitative survey of 43 questions was hosted by CoreData Research. Each of the 8,550 individual investors had minimum net investable assets of $100,000.
Those surveyed say the biggest roadblock to making an investment is that they simply don’t know enough about ESG (41%). This should not be confused with awareness. Only 17% in this group claim they don’t know what ESG is, Dave Goodsell, executive director of Natixis Centre for Investor Insight, said in a report.
“What they likely need is more details on how different strategies work and where ESG fits into their own investment plans,” said Goodsell.
The high expectations investors hold for themselves, policy makers, and private companies extend equally to the asset managers who run their investments, the survey showed.
ESG integration is top of the mind for a majority of investors, as three-quarters expect their fund managers to look at more than the financial aspect of a company when researching an investment. Investors also expect active ESG management with ongoing investments, as more than half (55%) believe fund managers should sell out of companies with poor ESG records.
“Investors want both value and values, and now that ESG investments have been seen to perform as well as non-ESG investments, there is only one path to choose. And it’s no longer just an ESG overlay, investors want it fully integrated into the investment process,” Chemouny said.
Investors also have high expectations for their fund managers to practice active ownership with the investments they hold. Seven in ten investors worldwide expect their fund manager to vote all the shares they own. Even more (74%) expect their fund manager to engage with the companies they’re invested with to influence both better business and ESG practices.
With the rising number of ESG-labelled products proliferating worldwide, investor sentiment indicates that they are smart shoppers when it comes to selecting investments. In evaluating funds, they are likely to look closely at the fund’s makeup and 65% believe there are certain controversial sectors – coal, tobacco, weapons, and others – that should always be excluded from ESG products.