How has the style of responsible investing evolved among institutions over the last five years?
A decade ago Nordic investors started this revolution by excluding companies. This evolved into integrating an analysis of ESG factors into the investment process, which allowed them to select the ‘best in class’. This has now evolved further into ensuring investments make a positive social impact and a greater focus on ensuring investors act as responsible corporate stewards.
Has a particular type of institutional investor driven this trend?
Over the last three to four years a rapid increase in the demand for ESG integration has come from insurance companies. Assessing environmental risk is part of an insurer’s DNA, as they are often underwriting risk for severe weather events such as hurricanes and floods. In a recent survey we conducted, 67% of worldwide insurers said they either already do include or are thinking of including ESG and climate-change factors in their investment policy. Insurers started this trend and pension schemes followed. Now other wealth managers and family officers are following in their footsteps.
How have the demands of institutional investors changed?
Over the past two to three years, investors want managers to demonstrate the impact of their investment. They demand proof the carbon footprint has been reduced and want to know the ‘temperature’ of the portfolio – in other words, that the allocations will help to mitigate global heating.