European and Asian institutional investors are at the forefront of adopting environmental, social, and governance (ESG) investment strategies, while North America lags behind, according to the Coalition Greenwich Voice of Client – 2022 Global Institutional Investors Study—Delivering on ESG.
Going forward, institutional investors plan to further increase ESG integration, particularly in equities and fixed income, and are likely to change investment managers in response to ESG considerations.
Globally, 75% of investors incorporate ESG strategies, with Europe leading at 92%, followed by Asia at 76%. However, North America trails at 53%, driven mainly by Canadian investors.
Overall, the main objective for using ESG is to make a positive impact on society, particularly the environment.
Unsurprisingly, investors’ ESG considerations differ across regions, with Europeans focusing on climate change and carbon emissions, while North Americans emphasise diversity and inclusion. Business ethics are the most important to Asians.
Net-zero targets have gained traction, with 15% of institutional investors globally setting such targets, and around a quarter of European investors adopting them.
In contrast, only 5% of North American investors have implemented net-zero targets.
SG-based investment strategies are gaining prominence globally, driven by the desire to make a positive societal impact” according to Sophie Emler, Senior Relationship Manager at Coalition Greenwich and author of the report.
She added that Europe and Asia lead in ESG adoption, while North America’s uptake remains comparatively low. Net-zero targets are becoming more prevalent, but greater understanding and evidence of ESG performance are needed from investment managers.
The report found that ESG knowledge is a crucial factor in selecting investment managers, with European and Asian investors considering it early on in the process.
However, only 6% of managers excel in communicating and providing evidence of ESG performance, while nearly 40% are considered “good.”
Looking ahead, roughly70% of large institutional investors plan to increase ESG integration in their allocations, especially in equities and fixed income.
Over half of current ESG investors expect to change investment managers on more than 10% of their portfolios in the next five years, with the trend led by the EU and Asia.
