In ESG investing, the S and G are less important than E

International survey of professional investors shows environmental factors have most potential to drive returns

In ESG investing, the S and G are less important than E
Steve Randall

Professional investors are dedicated to ESG investing but it’s the environmental element that is the main draw,

Two thirds of respondents polled by NN Investment Partners said that environmental factors have the greatest potential to drive returns, far more than the 40% who see potential in governance factors, and 15% who say social factors drive returns.

The international survey also reveals that, within the environmental sector of ESG, it is the energy transition from traditional fossil fuels to renewables has the greatest potential impact on returns (87%) followed by climate change (81%), and pollution (78%).

“Currently environmental issues are high on the political and economic agenda as there is a clear correlation with returns, so it is not necessarily surprising that investors tend to focus more on the ‘E’ of ‘ESG’, said Adrie Heinsbroek, Principal Responsible Investment at NN Investment Partners. “Climate change, pollution and global warming are prominent issues and positive impact is, for example, in terms of reduced CO₂ emissions or waste, more quantifiable and easier to report on. But from a portfolio diversification perspective, it is important to also look at social and governance factors as these criteria can also help pinpoint plenty of opportunities.”