​Chart Of The Week: Responsible Investment Surges In Importance

Responsible investment (RI) surged in importance for all types and sizes of institutional investor around the world in the last year, a new survey has found, with the biggest gains in positive sentiment towards the approach recorded among respondents in the UK.

Of the UK respondents to Aon’s 2019 Global Perspectives on Responsible Investing survey, 42% indicated RI was very important or critical to their organisation, up from 19% in 2018, and 87% answered that they believed the approach was at least somewhat important, up from the 66% who gave that response in 2018.

In continental Europe, those percentages were 85% in 2019, up from 80% in 2018.

In the US, meanwhile, the percentages were 78% compared to 57%, and in Canada the proportions were 78% — up from 66%.

Tim Manuel, head of responsible investment for Aon in the UK, said: “In the UK, where regulations in favour of responsible investing continue to strengthen, we see investors taking more concrete steps to implement responsible investments within their funds.”

The fact that Aon had a high response to the survey in the UK, with 43% of overall respondents being based there, was indicative of this frame of mind, Manuel said.

Meredith Jones, author of the report and global head of responsible investing at Aon, said the consultancy was also observing significant investor-led RI efforts where regulation was not driving activity, however. 

Year-on-year change in responsible investing attitudes by geographic region

The survey polled nearly 230 investment professionals internationally.

Corporate pension funds were revealed to have undergone a sea change in their attitudes to responsible investing, with the share of investors expressing a positive sentiment toward the approach growing from 56% in 2018 to 86% in 2019. Public pensions saw similar growth, according to the poll, but from a different departure point, with positive sentiment spreading from 70% of respondents last year to 92% in 2019.

Year-on-year change in responsible investing attitudes by investor type 

The most popular primary motivation for pursuing RI — across all investors — was the belief that incorporating environmental, social and governance (ESG) data leads to better investment returns, Aon said.

However, the firm said many UK and European respondents indicated in the survey that they were motivated to engage in RI in order to have an effect on global issues such as climate change, diversity or social justice.

“By contrast, only 10% of US investors and 8% of Canadian investors indicated global impact as a motivator,” Aon said.

According to the survey, lack of agreement on key issues, such as terminology and materiality, was a hindrance for fewer investors this year than last: 14% of those polled in the 2019 survey, down from 26% in 2018. However, Aon said the industry continued to struggle with what constitutes ESG, socially responsible investing (SRI), and impact investing. 

In its view, imprecise terms have been applied on a wide variety of investment products, with a number launched over the last 12 months under an ESG label when they included features that fell more under the headng of SRI and/or had impact goals as well. 

Aon said it continued to advocate “for the apt imposition of names when it comes to all things RI”. 

It also said it planned to launch an impact fund and a low carbon factor fund for its discretionary asset management clients.