Proof of Concept: In Time of Crisis, Sustainable Investing Stays Strong and in Favor With Investment Professionals
For almost a decade in this newsletter we’ve brought to you a steady stream of news, research and experts’ perspectives that focus on two related subject areas: (1) the escalating interest in the investment community in corporate ESG factors and adoption of sustainable investing approaches and (2) the corporate response, clearly in recognition of the intensifying competition for capital and so exerting efforts to excel in ESG strategy-setting, operational performance and disclosure.
It has taken some time for sustainable investing trends to capture wider investor attention and to persuade asset managers of the importance of ESG performance factors in normal times, with skepticism expressed (at first) quite frequently and then over time, less so.
Few mainstream asset managers are expressing doubts these days – and two powerhouse asset management firms (BlackRock and State Street) are very prominent champions of sustainable investing approaches.
We’ve seen the annual survey by the U.S. Forum for Sustainable and Responsible Investing (US SIF) survey of professionals managing assets starting out in the first survey with finding just US$639 billion in 1996 -- with respondents indicating they were using sustainable investing policies.
That moved to the level of $3 trillion AUM in 2010 and on to $13 trillion in the 2018 survey. That’s $1-in $4 of professionally-managed AUM for the assets they manage. (The next survey results will be announced later in 2020.)
Investors and corporate managers are usually looking for proof-of-concept for emerging trends and that has been the case for “SRI” / sustainable investing. The Covid-19 crisis is providing some of that for sustainable investing -- and making the case for corporate sustainability and embrace of the concept of ESG’s importance.
For example, the experts at HIS Markit have been offering perspectives on a range of issues and topics and recently shared the results of in-depth conversations with investors and analysts…during this time of market volatility and economic uncertain. What are the findings in terms of investor embrace of sustainable investing strategies?
Top lines: ESG criteria have been more important in the investment process in the coronavirus crisis. Issues in focus inside companies and by investors include such things as employee health & safety, corporate governance, and society-at-large.
Note this from the report: “Some investors and analysts value ESG now more than ever. They observe that the companies which have historically exhibited strong governance and the commitment to ESG are more effectively managed through this volatile period.” (Guess which companies may be more successful at attracting and retaining capital.)
The chief investment officer of a U.S. asset management firm told interviewers that the virus crisis has impacted how corporate governance is viewed …companies all over the world need to be thinking more broadly about who they want to be in the world aside from being rich.”
In a period characterized by the virus crisis and social unrest, a United Kingdom analyst interviewed said that “ESG was extremely important throughout last year and start of this year…there is a big demand for sustainable investments…and it’s there no matter if the global economy is weak or if there is a global pandemic…”
To be sure, there has been considerable good news for sustainable investment professionals and corporate sustainability managers in recent weeks, as investment professionals describe the resilience of companies with strong sustainability performance. There is still skepticism expressed (such as in the IHS survey) and convincing needed on the part of holdout asset owners and managers.
We’ll keep sharing the research results as experts look at the capital markets and the impact of the pandemic and widespread social unrest and protest on sustainability – positive and negative.
There is much more for you in the Top Story this week, in the HIS Markit Perspectives about the firm’s survey of investment professionals.
Our team is putting the finishing touches on the signature research effort of Governance & Accountability Institute – our annual look at the S&P 500® Index companies and their sustainability / responsibility / citizenship reporting. Watch for this in July, followed after by the team’s look at the second 500 large-caps in the Russell 1000® Index. We think you’ll find this year’s research effort very informative and useful in your own business – whether that be managing corporate sustainability and sustainable investment.
This is just the introduction of G&A's Sustainability