Sustainable investing remains key priority for institutional investors

Full integration is just a few years away says AGF Investments study

Sustainable investing remains key priority for institutional investors
Steve Randall

Sustainable investing is only going in one direction for institutional investors – forwards at pace.

A new study from Coalition Greenwich and commissioned by Toronto-based AGF Investments highlights widespread acceptance and an expected surge to full integration in the next five years, accelerating threefold from today’s levels. In North America, 55% expect to achieve full integration in this time, while in Europe 63% believe they will.

Nine in ten institutional investors across North America and Europe plan to be investing sustainably or working towards the introduction of sustainable practices in their portfolios in the next five years and they have some clear themes to focus on.

The most often targeted asset classes in thematic approaches are energy transition, water services and climate adaptation with 34% of investors focusing on energy transition while diversity, equity, and inclusion is a priority for endowments and foundations.  

Among the main trends identified in the study are:

  • Investment performance sentiment – most investors today expect sustainable investments to match or outperform investment benchmarks—while also delivering positive impact
  • Full integration – sustainable investment practices to be fully integrated across portfolios, asset classes and strategies
  • Greenwashing - investors are taking proactive steps to guard against this real concern
  • Thematic strategies – investors want thematic strategies that allow them to concentrate assets to enhance environmental and social impact, as well as investment returns

However, a lack of consensus on impact measurement and regulatory headwinds and uncertainty are wildcards for the industry as it tries to evolve sustainable investing.

“It is important to hear directly from institutional investors, and those in North America and Europe are clearly indicating that their interest in sustainable investing continues to grow,” said Karrie Van Belle, Chief Marketing & Innovation Officer, AGF Investments. “At AGF Investments, it is a priority to take what institutional investors have told us and ensure our investment capabilities and products continue to evolve to address their desired outcomes in key areas like supporting energy transition.”