Pandemic motivates some institutional investors to put greater emphasis on ESG

Some global institutional investors have placed greater emphasis on ESG considerations as a result of the pandemic, a new survey from RBC Global Asset Management suggests.

Among the 805 institutional asset owners, investment consultants and professionals surveyed for the fifth annual responsible investment survey, 29% said they’ve placed greater emphasis on ESG considerations due to the Covid-19 pandemic.

These investors were also “the most vigorous supporters of ESG as an enabler of investment performance,” a release said, as 97% said they think ESG-integrated portfolios are likely to perform “as well or better” than non-ESG integrated portfolios. That compares to 83% of overall respondents.

Among this same group of 29%, 80% said ESG integration helps create “long-term sustainable alpha” — significantly more than the 51% of overall respondents. Further, 88% said they believe ESG integration helps mitigate risk, compared to 61% of the total respondents.

There remains a “geographic divide” as well, the survey noted, when it comes to investors adopting ESG principles. For the fifth-straight year, European investors were most committed. About 96% of European respondents were using ESG in their investment strategies, compared to 64% of U.S. respondents and 81% of Canadian respondents. In 2020, 89% of Canadian investors said they used ESG principles.

The top ESG issue that overall respondents were concerned about was anti-corruption — the number one issue for the second consecutive year — followed by cybersecurity and climate change.

“With the backdrop of recent headlines on data-hacking incidents and ransomware attacks around the world, cybersecurity jumped to the second-highest priority, after being ranked fourth in 2020,” the survey noted.

Notable hacks last year included online exposure of Microsoft’s internal customer support database and the leaked personal information of millions of MGM Resorts hotel guests.

The majority of European investors (80%) said they address climate risk in their investment policies — a 15-percentage-point increase from last year and much greater than other regions. The result is likely attributable to the regulatory environment: 45% of European investors said government regulations were a top reason for incorporating ESG in their investment portfolios, compared to 12% of global respondents.

On fossil fuels, 45% of respondents said engagement was “more effective” than divestment, which was cited by only 10%.

About the survey: RBC GAM surveyed institutional investors and consultants in the U.S., Canada, Europe and Asia between May and July 2021. Nearly 45% of respondents represented organizations with $1 billion or more in assets. Survey results may be accepted as accurate, at a 95% confidence level, within a sampling tolerance of approximately +/− 3.5%.

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