ESG may be Catalyst to Solving the Savings Crisis – Natixis Global Asset Management
- Investors increasingly want investments to reflect personal values, with some stating access to ESG may actually increase and incentivize retirement plan participation 1, 2
- Professional investors say ESG becoming standard practice; considered for alpha and risk management 3
- Better measurement and reporting on both financial and non-financial performance will speed adoption 4
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Personal Values (Graphic:
The report surveyed 7,100 individuals from 22 countries, across three investor populations, including institutional decision makers, financial advisors, individual investors and participants in defined contribution plans in the
“Individuals clearly tell us that they want their investments to reflect their personal values. The environmental, social and ethical records of the companies included in their investment portfolios matter to investors,” said
Three-quarters of global investors say it is important that they invest in companies that reflect their personal values. This opinion is held consistently across gender, generation, and wealth bands within the survey population.
The findings show a large majority of investors find investing in companies with sound environmental records (70%), companies that are seen as doing social good (71%), and companies making investments that help to fund advancements in healthcare and education (71%) important. In addition, 78% stress the importance of investing in companies that are ethically run.
Additionally, there is a gap in the sentiment between how men and women perceive ESG and its framework within their portfolios. A slightly larger percentage of women (76%) are concerned with ESG factors compared to men (72%). Overall, there is a three- to five-point difference in opinions between the sexes across all factors. Investing in ethically run companies is where respondents place the greatest emphasis, with 81% of women saying it is important, 31% of whom say it is very important.
ESG as a Risk Management Tool
Although ESG may not be as familiar to financial advisors as traditional investment strategies, the discipline is gaining more attention within the financial services industry. Forty percent of advisors globally are already using ESG seeking to mitigate governance and social risks. Additionally, institutions surveyed anticipate a greater role for ESG, with six in ten predicting that it will become standard practice for their organizations within the next five years.
In terms of portfolio management, 55% say there is alpha 5 to be found in ESG, while 57% say ESG can help mitigate headline risks.
“The fundamentals of a company are only part of the story. Understanding how the board governs itself, its business, the environment in which it works and its employees live, as well as how it treats people are equally critical to discovering good, long-term investments,” said
Still, the investment community faces great challenges when it comes to successful implementation of ESG measures. Reporting on both financial and non-financial performance ranks as a top hurdle for institutions, while advisors are challenged by the lack of a sufficient performance track record.
However, the increasing number of fund ratings bureaus and research houses introducing tools to address monitoring and measurement of ESG factors is helping to reduce the difficulty of performance reporting.
“There are real world changes, like population growth, urbanization, and resource depletion, that may have an immeasurable effect on equity markets and transform companies as we know them today. These trends may present investors with potential opportunities, as well as connect them to their portfolio, in ways traditional investments do not. If it’s possible that these options will entice investors to save more because of the ESG elements in a portfolio, then ESG solutions are not only offering a more complete solution to investors, but also playing a role in the evolution of the world as we will know it,” continued
These findings are published in a new whitepaper, “Mind Shift: Getting Past the Screen of Responsible Investing.” For more information, visit http://durableportfolios.com/global/understanding-investors/environmental-social-governance-survey-findings
The views and opinions expressed may change based on market and other conditions.
ESG investing focuses on investments in companies that relate to certain sustainable development themes and demonstrate adherence to environmental, social and governance (ESG) practices, therefore the universe of investments may be reduced. A security may be sold when it could be disadvantageous to do so and opportunities may be missed in certain companies, industries, sectors or countries. This could have a negative impact on performance depending on whether such investments are in or out of favor.
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Natixis AM
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Management, S.A.’s affiliated investment management firms and distribution and service groups include
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5 A measure of the difference between a portfolio's actual returns and its expected performance, given its level of systematic market risk. A positive alpha indicates outperformance and negative alpha indicates underperformance relative to the portfolio's level of systematic risk.
1 Cerulli Quantitative Update: Global Markets 2016 ranked
2 Net asset value as of
3 A division of
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7 Operated in the
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Press Contact:
Elizabeth.Bartlett@ngam.natixis.com
or
Ted.Meyer@ngam.natixis.com
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