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Increased momentum towards sustainable investment

There is a growing momentum in sustainable investing, with 84 per cent of asset owners taking action to include environmental, social and governance (ESG) in their investment process. A survey by Morgan Stanley found that a majority of institutional asset owners are now pursuing sustainable investing to manage risk and drive returns. The survey, which polled 118 public and corporate pensions, endowments, foundations, sovereign wealth entities, insurance companies and other large asset owners worldwide, 60 per cent of which had total assets over $10 billion, found that 70 per cent of investors have already implemented ESG strategies.

Risk management and potential for returns are the top drivers of interest in sustainable investing, the survey found. However, investors said that they need better data and investment information, as getting access to quality ESG data is a top concern. Morgan Stanley's Hilary Irby said: “With this growing momentum in sustainable investing, third-party managers have an opportunity to increase implementation by improving reporting tools and education, and developing capabilities to align portfolios with owners’ unique objectives.”

The study found that:

  • 84 per cent of asset owners are pursuing or actively considering pursuing ESG integration in their investment process;
  • of those, 60 per cent began implementing ESG strategies in the last four years and 37 per cent within the last two years;
  • 70 per cent of asset owners have already implemented ESG strategies; 49 per cent of those have implemented ESG across their entire portfolio and 21 per cent have implemented them in a portion of their portfolio;
  • 78 per cent said risk management was an important factor driving sustainable investing at their organizations, and 77 per cent said return potential was important;
  • 78 per cent seek to align their investments with the UN Sustainable Development goals or are considering doing so;
  • 77 per cent of respondents agree they have a responsibility to address sustainability through their investments;
  • proof of market-rate financial performance remains the top challenge;
  • lack of tools and data is a barrier – only 42 per cent feel they have adequate tools to assess.

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