Yesterday the Financial Times published an article stating that U.S. investors are ramping up their efforts around environmental, social and governance (ESG) factors, particularly in regard to climate change, according to a new Mercer study.
Historically U.S.-based investment institutions have lagged behind their European counterparts in implementing ESG strategies. Of the more than 915 institutions that signed the UNPRI, only 63% went on to follow the allocation guidelines.
The Mercer study entitled: “Climate Change Scenarios – Implications for Strategic Asset Allocation“, looks at 12 institutional investors with more than $3 trillion under management combined and tracked their investment behavior over the past year with regard to ESG. The study found that 80% of the institutions have increased, or will soon increase, their ESG-related engagement with either asset managers or directly with companies. This is to better understand the inherent climate risk in various strategies.
The increased demand for ESG strategies is likely due to recent market volatility, which has institutional investors searching for sustainable investment products. “Turbulence in the financial markets, issues like BP and Fukushima, and climate change are behind it, no doubt,” says Neil Johnson, U.S. managing director of Sustainable Asset Management, a $13 billion Robeco subsidiary that specializes in responsible investing.
“Collecting the material non-financial information [on climate risk] that helps you make a better informed stock selection decision in order to build a portfolio that will add value is gaining interest. Institutional investors are catching up with the thought that there’s alpha to be had, and risk mitigation and just a good sustainable, long-term way to invest,” Johnson says.
Are you surprised by the results of this study, or does it align with trends we’ve been seeing recently? Do you think we will see an even bigger increase in investor interest in 2012? Discuss!
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