Sustainable investment had little to no influence on the decision-making process of 32% of institutional investors, according to a report by British fund manager Schroders.
The Schroders Institutional Investor Study 2018 revealed a “mismatch” between the perception of sustainability’s significance by investors and reality.
According to the study, investors placed more importance on strategic asset allocation, fund manager track record, anticipated return and risk tolerance for decision making.
Of the 650 institutions polled, larger institutional investors were found to place a bigger focus for sustainable allocations.
Also, 59% of investors prioritising sustainability were found to be more confident of meeting their expectations, versus 37% of investors who thought otherwise.
At the same time, 66% of investors prioritising sustainable investment were found to be focussed on generating risk-adjusted returns, compared to 53% who did not emphasise sustainable investing.
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However, 74% of investors believed sustainable investing to grow in significance over the next five years, while 47% said they had increased their sustainable allocations in the last five years.
Seventy seven percent of investors found sustainable investing to be challenging, with 51% of investors citing performance concerns as the main impediment.
Investors also cited lack of transparency and difficulty in measuring risk as the other challenges in this area.
Schroders global head of stewardship Jessica Ground said: “There remains a gulf between institutional investors’ sustainable investment aspirations and the reality of how they prioritise these factors in their investment decision-making. Investors clearly recognise that investing sustainably is going to be more and more important going forward, but this approach is yet to sit at the heart of their investment process.
“This study demonstrates that investors who prioritise investing sustainably tend to have longer-term investment horizons and greater confidence about achieving their return targets. Empowering investors to think longer-term and avoid making short-term, knee-jerk investment decisions has also been a growing focus of policymakers globally.”