A new survey by Natixis Investment Managers finds that 65% of institutional investors believe that ESG investing will become the norm within five years, up from 60% in 2017, and 56% believe that there is alpha -- excess investment returns -- through ESG practices. The key findings from the survey include:
- Most frequently, investors integrate ESG analysis as part of their fundamental analysis approach, while 28% use negative screens to exclude investments based on poor ESG performance, while 13% implement best-in-class strategies that select companies based on positive ESG performance relative to peers.
- 10% also deploy impact strategies aimed at solving key social or environmental problems
- The top three reasons investors engage in ESG investing are to align investment strategy with organizational values (59%), minimize headline risk (38%), and because it is mandated by investment policy (30%), while 20% indicate they seek ESG investments to achieve higher risk-adjusted returns.
- The priorities above may explain why investors give somewhat greater importance is given to environmental (76%) and governance (70%) factors than social factors (61%).
Meanwhile, a new report authored by ValueAct Capital partners and the Stanford Graduate School of Business demonstrates how activist investors are integrating ESG into their portfolio analysis. According to the article, ValueAct has "adopted an approach to evaluate ESG-related factors as part of its decision-making process and has deepened engagement with its portfolio companies around these issues. It does so because analysis of ESG factors can:
- Provide an effective risk-management framework
- Provide a new lens for strategy development and growth opportunities and
- Address the demands of stakeholders such as customers, employees, and investors.