Institutional investors placing more emphasis on ESG factors

Environmental, social and governance (ESG) risks are becoming more important to Canadian institutional investors, with 91% saying they’ve changed their policies to be more attentive to those factors, a new survey says.

The “Edelman Trust Barometer Special Report: Institutional Investors” found that 91% of institutional investors in Canada would consider a lower rate of return in order to include sustainable and impact investing considerations.

The top three issues companies should take a stand on are cybersecurity, globalization and income inequality, investors said.

Nine in 10 institutional investors said their firms are more interested in taking an activist approach to investing. The same number believe most companies aren’t prepared for shareholder activism, the report said.

When it comes to investor relations, almost 90% said reporting is outdated, with respondents wanting information displayed more visually and with more forward-looking disclosures.

But investors aren’t only relying on standard communications, the report said. Almost 90% of investors consult a company’s or executive’s social media channels to evaluate an investment.

Other findings:

• One-quarter of Canadian investors think the bull market will end in the next six months (compared to 18% of U.S. investors); 53% believe it will end in the next year.
• 85% of Canadian investors are more likely to invest in U.S. assets because of the Trump administration’s economic, trade and immigration policies (the policies were lumped together in the report).

The report is based on an online quantitative survey of 500 institutional investors in the U.S., Canada, the U.K., Germany and Japan. Participants included portfolio managers (39%), chief investment officers (29%), financial analysts (26%), directors of research (4%) and ESG analysts (1%). Respondents represent firms that manage assets ranging from less than US$500 million to more than US$50 billion. Data fieldwork was conducted by Edelman Intelligence from Sept. 9 to Oct. 22, 2018.

Read the full Edelman report here.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.