More than half of asset owners in survey worry about the risk performance of climate-related holdings
While environmental, social, and governance issues have risen in prominence among many asset owners, they still consider returns as the most crucial factor in the investment process.
That’s according to a new study from Ninety One, a global investment manager with US$154 billion in assets.
According to the research – which drew on a study of 300 specialists employed by asset allocators and advisors around the world, including endowments, pension plans, foundations, and sovereign wealth funds – ESG investing is now a strategic objective for 60% of asset owners in North America, reported Institutional Investor.
Read more: Institutions' ESG-related AUM to surge 84% by 2026 says PwC
For 55% of respondents, the risk and return performance of their holdings was the primary concern of their funds. In addition, 40% of asset owners think that investing in funds related to climate change will result in reduced returns.
These findings come as ESG funds find themselves beleaguered by stiffer regulations, growing recessionary anxieties, and the emergence of anti-woke groups.
Based on KPMG's recently published 2022 U.S.CEO Outlook, 48% of asset management CEOs want to stop or rethink their ESG initiatives during the next six months.
Allocators in North America also have the lowest adoption rates for transition finance, which a Ninety One defines as "an investment approach that focuses on real-world impact," with only 17% of North American survey respondents reporting that they have done so.
Nevertheless, the survey stated that more asset owners in North America than in any other region think that transition finance presents a significant economic opportunity, showing that the desire to get over any obstacles "is still in place for many."
Read more: Most investors want an energy transition – but not just any transition
In emerging nations, ESG investment challenges are much more pronounced. According to the research, just one sixth of respondents (16%) stated their funds invest in transition-finance assets in developing nations.
“We know that the amount of money being deployed for transition finance [in] emerging markets is about 10 percent to 20 percent of what it needs to be if we’re going to achieve the Paris Agreement targets,” said Faith Ward, chief responsible investment officer at Brunel Pension Partnership.
