Schroders Institutional Investor Study 2022 shows that it is now a key pillar of sustainable investing, but can it deliver required returns?
A survey of global institutional investors highlights a key role that impact investing has in the drive to sustainable portfolios.
Schroders Institutional Investor Study 2022 reveals that 48% of investors said that impact is their preferred way to implement sustainability, up from 38% last year and just 34% in 2020.
There has also been an increased focus on full ESG integration into the investment process.
Boosting sustainable investments includes a strong focus on new investment opportunities for the energy transition (59%).
However, there is an increasing concern among institutional investors about performance with 53% of respondents expressing this compared to 38% a year ago, although challenging market conditions will have played a part in this decline.
Transparency and lack of reliable data is also a concern for these large investors representing a combined AUM of US$27.5 trillion.
Engagement is also a recurring theme, with 64% believing that governance is the top engagement theme, followed by human rights and the climate.
“The findings of today’s influential Study are striking; more and more institutional investors want to measure, manage and deliver impact,” commented Andy Howard, Schroders global head of sustainable investment. “Recognising concerns over tensions between sustainable investment and return goals, it’s becoming clear that thoughtful approaches grounded in investment experience will be increasingly critical.”
Weakened confidence
The study also highlighted the weakened outlook among institutional investors for the next five years.
Confidence in returns was lowered by inflation, interest rates, geopolitics, and a global slowdown.
“The Study found that investors’ allocations to equities have dipped, reflecting our own house positioning,” said Johanna Kyrklund, Schroders group chief investment officer and co-head of investment. “Indeed, determining what other positions to own around that core defensive position in equities requires a view on whether rates or growth risks are most important.”
