Survey: ESG Investments — Overview and Market Outlook
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The idea of socially responsible investing has existed for decades, but it was in the 2010s that investors began earnestly applying environmental, social, and governance (ESG) criteria to their investment decisions. Reacting to the financial crash of 2008, fund and portfolio managers looking to restore trust in the capital markets embraced corporate governance reform.
The second half of the decade saw environmental and social issues gaining traction, likely in response to such things as the #metoo scandals, diversity issues, data privacy, climate change, environmental disasters like the Deepwater Horizon oil spill, and the increased call for sustainable business practices.
By 2020, ESG investing had gained a significant toehold, but it was the COVID-19 pandemic that gave it a firm platform on which to stand, raising the importance of ESG criteria for many investors and bringing it into the mainstream for the foreseeable future.
Survey and Panel Demographics
To find out more about the current state of ESG investing, the importance of its different components, and key issues for environmental, social, and governance, GLG conducted a June to July 2021 survey of 90 financial services industry professionals in seven countries. Sixty-four percent of the professionals we surveyed were C-level executives, 22% were fund managers, 12% were portfolio managers, and 2% were co-fund managers. When asked what type of fund they were managing, 91% of our respondents reported that they primarily managed ESG funds.
ESG Components and Issues
The survey found little difference among the relative importance of ESG components when it came to portfolio management. Respondents ranked environmental concerns as highest (68%), but the other components came in with very little statistical difference, with governance ranked at 66% and social issues ranked at 61%.
When we asked our respondents about the top three issues within those components, we saw a greater span of ranked concerns. For example, of the top four issues for environmental concerns, we saw climate change ranked first, with 76% of our respondents ranking it a top concern, while less than half (43%) ranked biodiversity as a top concern. Social issues saw the tightest span, with 52% ranking health as a top issue and 30% ranking racial equality as an important factor. Finally, for governance, 85% of those investment professionals who took our survey ranked business ethics as an important issue, while just under half (49%) indicated that anti-trust issues were of importance.
Sustainable Development Goals
In 2015, all United Nations Member States adopted the 2030 Agenda for Sustainable Development, which “provides a shared blueprint for peace and prosperity for people and the planet, now and into the future.” The agenda lists 17 Sustainable Development Goals (SDGs) that “recognize that ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth — all while tackling climate change and working to preserve our oceans and forests.”
Of the investment professionals GLG surveyed, 87% said it was likely that investors would consider SDGs in their investments. Just more than half (52%) of our respondents ranked climate action as the number one goal, followed by quality education at 43%, gender equality at 36%, and the elimination of poverty at 27%.
Market Outlook for ESG
When asked whether ESG is likely to become standard in the next five years, our respondents overwhelmingly (87%) said that it is indeed on its way to becoming integrated into mainstream investment practices.
Most of those (62%) we surveyed suggested that asset managers should focus more on environmental issues to differentiate portfolios over the next five years, but most viewed ESG holistically, with 51% seeing a continued focus on social issues and 47% seeing governance issues as top investing differentiators.
But ESG is not without challenges. The top two concerns centered on the political sensitivity (62%) and controversial nature (51%) of certain ESG issues. Those we surveyed also ranked data issues highly, with 48% citing the comparability of data as a challenge and 39% citing the lack of easy access to data.
For most of us, climate change, diversity, and the need for sustainability are top of mind in our daily lives. As companies take more responsibility for the world around them, they’ve become important issues for investors as well. With just the last few years as evidence — out-of-control wildfires, a global pandemic, demands for social justice occurring globally — it’s clear that the world is intrinsically bound together. GLG’s survey shows that ESG investment professionals can see that making responsible decisions is the best way forward for their clients.
Sample Questions Covered in the Full ESG Survey
- How important are the following ESG components to investors?
- What are the top three most important environmental issues for ESG investors?
- What are the top three most important social issues for ESG investors?
- What are the top three most important governance issues for ESG investors?
- How important are the United Nations Sustainable Development Goals as part of the investment framework for ESG investors?
- How likely are companies to start using the U.N. Sustainable Development Goals (SDGs) as part of their investment framework?
- How are companies primarily using the SDGs?
- How likely do you think ESG investing will become a standard in the next five years for other funds similar to yours?
- From your experience, what are the top three biggest ESG challenges?
- What role do you think technology and digitization play in addressing some of the ESG challenges?
- What are the main hurdles that face the industry around ESG?
About GLG Network Surveys
GLG’s Network Surveys administer research on market-moving topics and trends, surveying relevant subject matter experts. Each survey focuses on a specific industry, and respondents have in-depth expertise about the latest developments in that industry. To ensure that the survey’s focus is relevant to the panelists, our Network Surveys team partners with a GLG expert with deep industry knowledge to write the questionnaire. GLG currently runs approximately 12 Network Surveys every month.
The standard deliverables for our Network Surveys include:
- 1 x individual responses (“raw data”) in Excel.
- 1 x PPT report with aggregated data.
- For selected topics: executive summary with key takeaways and conclusion.
- For selected topics: in-depth PowerPoint report of survey findings presented by the Network Member via webcast (optional).