Global Sustainable Investment Report
The Harvard Law School Forum on Corporate Governance released the Global Sustainable Investment Report.
Harvard University surveyed more than 400 relevant personnel from consulting companies, asset management companies, investment banks, family offices, accounting firms and academic institutions.
Since there is currently no consistent definition of sustainable investment, contents about global sustainable investment is divided into two parts: impact investment (seeking positive social and environmental impact of investment) and ESG investment (environmental, social and governance) in order to help the interviewee understand the questions.
Related Post: What is Impact Investing and How is it Different from ESG Investing
Overview of Global Sustainable Investment
In terms of the application of Sustainable Investment, 37% of respondents have incorporated sustainable investment principles into their portfolios (up from 30% two years ago), 20% of them have sustainable investment experience for more than two years, 15 % have more than one year of sustainable investment experience.
In the choice of “performance is the core factor” or “sustainability is the core factor”, the proportion of respondents has both increased compared with two years ago, which means that the number of people who are in favor of sustainable investment and against sustainable investment are increasing. However, inquiries from customers on asset sustainability have increased from 17% to 25%, and the proportion of sustainable asset allocation has also increased from 27% to 34%.
In terms of asset types for sustainable investment, 73% of private equity managers have applied sustainable investment methods, followed by stock managers and real estate managers. Hedge fund managers have the lowest adoption rate (less than 10%) because their investment strategies are difficult to link to sustainability.
Respondents’ Concerns about Sustainable Investment
Although more than 75% of respondents believe that it is important to incorporate sustainable thinking into the investment process, the proportion of respondents who do not intend to make any sustainable investments has increased (from 11% two years ago to the current 23%). Respondents indicated that early sustainability advocacy has increased their attention, but there is a growing perception that these principles are not suitable for inclusion in investment portfolios.
Respondents’ concerns about sustainable investment are directly related to their region. Among the 46 respondents who said “performance is the core factor”, 35 are from North America, accounting for 28% of the total respondents in North America. In the European region, only 7 respondents held this view, accounting for 18% of the total respondents in Europe.
In addition, when it comes to the presentation of sustainable investment, many respondents have begun to avoid expressing their views on ESG practices in public conversations in order to reduce investor resistance. 51% of the respondents reduced their chances of recommending sustainable assets after due diligence.
ESG Investing and Impact Investing Developments
In terms of ESG investing, 51% of respondents use ESG factors to measure whether investees can be included in portfolios to reduce potential risks. However, in terms of continuous tracking of ESG factors, only 44% are still measuring and reporting related risks. In the definition of ESG portfolio, some managers believe that it should not include too many non-ESG related assets, while others believe that it only needs to include a certain proportion of ESG assets.
When it comes to impact investing, 63% of respondents have already started adopting an impact investing strategy, and another 13% are developing an impact investing strategy. In terms of the application of impact investing, 33% of the investment managers have five years of experience, and the proportion of investment managers who are new to the market is even higher.
In terms of regions for impact investing, 51% of respondents in North America have been offering these strategies for five years ago, higher than those in Europe (27%). Among the topics involved in impact investment, energy (62%), climate (60%) and agriculture (44%) accounted for the highest proportion, while air (23%), land (23%), ocean (20%) is relatively lower. The respondents may lack relevant knowledge and they may allocate less money in these aspects
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