ESG tops the agenda for global institutional investors, says Economist Intelligence Unit

• A new study "Resetting the agenda - How ESG is shaping our future” reveals that a majority (74%) of survey respondents agree that their ESG-integrated investments had better financial performance than their equivalent traditional investments in the three years prior to 2020.
• The survey respondents include 450 investors from North America, Europe and Asia-Pacific.
• North American investors appear to be ahead of their counterparts in other regions in terms of ESG integration, with 41% having at least 50% of their AUM currently integrating ESG criteria, compared with a quarter in Asia-Pacific and just 18% in Europe.
• Three-quarters of institutional investors globally agree that the coronavirus pandemic will accelerate the general interest in ESG and capital inflows into sustainable investments.
  

UBS Asset Management today announced the results of a comprehensive global study conducted by The Economist Intelligence Unit (EIU), “Resetting the agenda - How ESG is shaping our future”. The EIU surveyed 450 institutional investors across the world to see if ESG remains top of their agenda as they grapple with the repercussions of the COVID-19 pandemic. The results affirm that investors believe that ESG is moving from an investment risk to an opportunity.

The study found:

• Almost three-quarters of survey respondents agreed that their investments that integrated ESG factors performed better financially than equivalent traditional investments in the three years prior to 2020 (not just during the pandemic as recent data has shown).
• Three-quarters of investors agreed that the pandemic has accelerated their interest in ESG and, unsurprisingly, inflows into sustainable investments are expected to continue gathering pace in the next three to five years.
• Since the beginning of 2020, the drivers for further ESG integration are expected to have shifted in the light of the wide-ranging impacts of the COVID-19 pandemic. Enhanced returns are a top-three driver, but mitigation of the downturn induced by the COVID-19 recession, cited by 26% percent of respondents, ranks number one on the list.
• In terms of ESG factors considered, small regional differences are seen – investors in Asia-Pacific ranked social issues (53%) higher than the other regions, and those in North America ranked environmental (60%) and governance (61%) factors higher.
• North American investors appear to be ahead of their counterparts in other regions in terms of ESG integration, with 41% having at least 50% of their AUM currently integrating ESG criteria, compared with a quarter in Asia-Pacific and just 18% in Europe.
• Concerns around the sustainability agenda are reflected in the investment themes that survey respondents said that they are looking to invest in. Of the top five, four are related to the environment – renewable energy and energy efficiency, climate change adaptation and mitigation, pollution prevention and control, and sustainable water and wastewater management.

Suni Harford, President UBS Asset Management, said: "Our clients take ESG seriously in their decision making, and sustainable investing is no longer a 'nice to have', but a 'must have'. The results of this latest survey shows that ESG is both a new performance marker and a growth driver in this environment, and institutional investors are using ESG to make better investment decisions and to assess their own performance. We will continue to support our clients in their drive to integrate sustainability factors into their investment portfolios."

Candice de Monts-Petit, Senior Editor, The Economist Intelligence Unit said: “The silver lining of the COVID-19 pandemic is the opportunity that investors have been given to reset their agenda. Our research shows that the importance of integrating ESG factors into investment decisions is now well understood. Investors are increasingly developing methodologies to assess non-financial performance, aligning with impact frameworks such as the UN SDGs, and proactively engaging with companies to implement positive change. This shift towards sustainable finance is supporting a better future for people and planet."

The Economist Intelligence Unit (EIU), commissioned by UBS, surveyed 450 institutional investors working in asset and wealth management firms, corporate pension funds, endowment funds, family offices, government agencies, hedge funds, insurance companies, pension funds, sovereign wealth funds and reinsurers in North America, Europe and Asia-Pacific.

UBS AM's core Sustainable Invested Assets under Management are now over USD 110 bn in SI focused AUM (as at 31 March 2021). Its Climate Aware strategies, which help institutional clients measure and reduce the carbon footprint of their portfolios, increase almost five-fold to USD 15.3 billion from USD 3.1 billion in 2019.