Schroders: Climate Change Key Topic As Investors Embrace Sustainable Investment

Scepticism about the value of sustainable investment is declining worldwide, data from asset management giant’s latest survey shows

Scepticism about the value of sustainable investment strategies has fallen by almost 50 per cent in just three years, according to the latest attitude survey conducted by global investment management firm Schroders.

The proportion of investors globally who do not “believe in sustainable investment” has fallen from 20 per cent in 2017 to 11 per cent this year, Schroders Institutional Investor Study 2019 found. The decline was most striking in Latin America, where the total number of sceptics plummeted almost threefold, from 29 to 12 per cent.

Sustainable investment funds and products have long been dogged by a widespread market belief that they deliver weaker financial returns than mainstream products, despite substantial evidence to the contrary.

But with demand for environment, social, and governance (ESG) focused funds and green bonds growing rapidly, the Schroders report provides further evidence attitudes are shifting.

Despite growing belief in the importance of sustainable investment, however, almost one-fifth of investors said they do not currently invest in sustainable investment funds.

In a parallel development, the study found climate change is now considered one of the most important areas of engagement among investors, overtaking traditional touchstone issues such as corporate strategies and accounting quality.

In a sign that calls for the private sector to engage with the world’s social and environmental challenges are resonating, corruption, diversity and labour rights all also saw an uptick in their significance as stewardship topics.

Three-quarters of investors responding to the survey voiced expectations that sustainable investing will grow in importance over the next five years, up from 67 per cent in 2017. In Europe, that proportion reached a resounding 84 per cent.

“These findings deliver perhaps some of the clearest evidence to date of how even the most sceptical of institutions are now recognising that investing sustainably can deliver better long-term outcomes,” said Jessica Ground, global head of stewardship at Schroders.

“This trend is also no longer confined to specific regions globally; investors across all the continents surveyed – including those which are often not associated with a strong sustainable focus – are increasingly convinced by the benefits that sustainable investing can deliver,” she added.

The findings of the report are reflected in the markets themselves. Research released Monday by BNP Paribas put sustainable bond issuances in 2019 at $178bn, a 48 per cent increase on the same period last year. It predicts green bond market could reach between $220bn and $250bn by the end of the year, setting a new record for the sector.

Schroders’ study also canvassed suggestions for how green investment trends could be accelerated further. Respondents stated that the availability of better data or evidence which could demonstrate that investing sustainably delivers better returns would be a key factor in encouraging them to allocate more funds to sustainable investments. Greater transparency and better ESG-related benchmarks were considered the next most important factors.

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