Institutional investors are also
increasingly turning their attention towards impact
investing
Key Highlights:
- 75% of institutional investors incorporate ESG principles
into their investment process, up from 70% in 2019
- Investors globally are becoming increasingly convinced that
ESG integrated portfolios can mitigate risk and increase returns.
Over 84% of survey respondents believe ESG integrated portfolios
perform as well or better than portfolios that do not integrate
ESG
- While most major markets are increasingly embracing ESG, the
US continues to diverge, with ESG adoption in the US stalling.
Nearly 26% of US investors also expressed skepticism about ESG's
performance merits
- The COVID-19 pandemic is beginning to influence views on ESG
adoption, and investors are looking for more company disclosures
around "social" factors such as employee health care
- Anti-corruption is now the top ESG concern for institutional
investors
TORONTO, Oct. 14, 2020 /PRNewswire/ - The adoption of
environmental, social and governance ("ESG") integration continues
to grow globally, but US institutional investors are becoming more
skeptical of its performance merits, according to the 2020 RBC
Global Asset Management ("RBC GAM") Responsible Investment
Survey.
Compared to 2019, there is an increase in the percentage of
institutional investors who believe ESG integrated portfolios are
likely to perform as well or better than non-ESG integrated
portfolios in Canada (97.5% up
from 90%), Europe (96% up from
92%) and Asia (93% up from 78%).
However, respondents in the US are more skeptical of the
performance of ESG integrated portfolios, as only 74% (down from
78% in 2019) believe they perform as well or better, and over a
quarter of US respondents (up from 22% in 2019) believe ESG
integrated portfolios perform worse.
This trend was also evident when respondents were asked about
the ability of ESG integrated portfolios to generate long-term
sustainable alpha and to mitigate risk. The majority of
institutional investors in Canada
(70%), Europe (72%) and
Asia (71%) believe adopting ESG
factors can help generate long-term sustainable alpha, while
investors in the US are not as convinced, with nearly 60% saying
they don't believe or are not sure. When asked about the ability of
ESG integrated portfolios to mitigate risk, just over half (53%) of
US investors believe it can help, while investors in Canada (87%), Europe (85%) and Asia (65%) are much more convinced.
The ongoing COVID-19 pandemic is beginning to influence
investors' views about ESG. While the importance placed on ESG
considerations hasn't changed for the majority of investors, over
28% said COVID-19 has made them place more importance on ESG
considerations, making this a notable factor that is new in 2020.
Also of note, 53% of investors are looking for companies to
disclose more details about worker safety, employee health
benefits, workplace culture and other social factors due to the
pandemic.
"As we analyze the trends in our year-over-year survey data,
we've found that a growing majority of institutional investors are
convinced of the merits of ESG adoption in their investment
approach," said Melanie Adams,
Vice-President and Head of Corporate Governance and Responsible
Investment at RBC Global Asset Management. "A new trend to follow
going forward is how the COVID-19 pandemic will influence
investors. In this year's data we are already seeing a greater
demand for disclosure on employee health and safety and we expect
that the effects of COVID-19 will have implications on investor
sentiment for years to come."
Global Highlights
Other key findings from the survey include:
- Investors are paying closer attention to supply chain risk
during the pandemic: For the 36% of respondents who are more
closely focused on specific ESG factors due to the pandemic, the
top three factors cited were supply chain risk (43%), climate risk
(37%) and workplace culture (31%).
- Support for diversity and inclusion targets for corporate
boards remains strong: During a time with renewed focus on
Black Lives Matter and racial justice issues, more respondents
favoured board minority diversity targets (44%) than opposed them
(28%). Similarly, more respondents favoured board gender diversity
targets (49%) than opposed them (26%).
- Investors plan to focus more on impact investing: Since
last year, there's been an increase in the number of investors who
expect to allocate funds to impact investing solutions. This year
40% of investors said they plan to allocate more money to impact
investing products in the next 1 – 5 years, an increase from the
28% who said the same a year ago. European respondents expressed
significant interest, with 63% planning to allocate money to impact
investing products in the near future.
- European investors lead on climate risk in investment
policies: Globally, about 72% of respondents responded "no" or
"not sure" when asked if their investment policy addresses climate
risk. The significant outlier was Europe, where nearly 65% of respondents
addressed climate risk in their investment policy.
- Investors demand more climate-related investment
solutions: Over 80% of survey respondents across US,
Canada, Europe and Asia responded "no" or "not sure" when asked
if there are sufficient climate-related investment products
available. When looking at different climate-related strategies,
investors are most interested in the following: renewables (55%),
carbon neutral or low carbon strategies (54%), transition
strategies (48%) and fossil fuel free strategies (36%).
- Anti-corruption is a top concern: The RBC GAM survey
asked respondents to rank which ESG issues they are concerned about
when investing. Anti-corruption was ranked first globally, followed
closely by climate change and shareholder rights, which tied for
second.
"We are seeing investors concerned with a wide range of ESG
factors, from anti-corruption to climate change and shareholder
rights. By understanding the complexities of these factors on
corporate value creation, investors can make better long-term
investment decisions," said Habib
Subjally, Senior Portfolio Manager and Head of Global
Equities at RBC Global Asset Management (UK) Limited. "What is
notable in the results this year is that a vast majority of
institutional investors are interested in how climate-related
considerations are factored into their investments. We think this
presents an important opportunity for asset managers, financial
advisors and consultants to speak with their clients about how
climate-related considerations can play a part in their investment
goals."
Global Adoption – Regional Divide is RBC GAM's fifth
annual survey of institutional investors' perceptions regarding
responsible investment. For this year's report, RBC GAM, which
includes BlueBay Asset Management, surveyed 809 institutional asset
owners, investment consultants and investment professionals in
the United States, Canada, Europe and Asia between June and August 2020.
About RBC Global Asset Management
RBC Global Asset Management (RBC GAM) is the asset management
division of Royal Bank of Canada
(RBC) and includes RBC Global Asset Management Inc., RBC Global
Asset Management (U.S.) Inc., RBC Global Asset Management (UK)
Limited, RBC Global Asset Management (Asia) Limited, and BlueBay Asset Management
LLP, which are separate, but affiliated subsidiaries of RBC. RBC
GAM is a provider of global investment management services and
solutions to institutional, high-net-worth and individual investors
through separate accounts, pooled funds, mutual funds, hedge funds,
exchange-traded funds and specialty investment strategies. The RBC
GAM group of companies manage approximately $520 billion CAD in assets and have approximately
1,400 employees located across Canada, the United
States, Europe and
Asia.
About RBC
Royal Bank of Canada is a global
financial institution with a purpose-driven, principles-led
approach to delivering leading performance. Our success comes from
the 86,000+ employees who bring our vision, values and strategy to
life so we can help our clients thrive and communities prosper. As
Canada's biggest bank, and one of
the largest in the world based on market capitalization, we have a
diversified business model with a focus on innovation and providing
exceptional experiences to more than 16 million clients in
Canada, the US and 34 other
countries. Learn more at rbc.com.
We are proud to support a broad range of community initiatives
through donations, community investments and employee volunteer
activities. See how at rbc.com/community-sustainability.
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SOURCE RBC Global Asset Management Inc.