Evolving priorities in the investor landscape
In October 2017 S&P Global stated that $23 trillion of investments under management globally are oriented towards an ESG based approach. This figure is now closer to $30 trillion. Furthermore, S&P report that 95% of responding institutional investors plan to engage with companies they invest in about issues related to the UN sustainable development goals (SDG’s).
deVere Group conducted a recent survey of 1,125 people which identified that 77% of the people born between the early 1980’s and mid 1990’s (aka “Millennials”) consider ESG factors to be their top priority when picking investments. Nigel Green, CEO of deVere states:
“For this reason, and because the biggest-ever generational transfer of wealth – likely to be around $30trn (£23trn) – from baby boomers to millennials will take place in the next couple of years, ESG investing is set to grow exponentially in the 2020s.Institutional investors are increasingly looking to allocate capital towards companies which help address environmental and social challenges. The idea that responsible businesses can and should have a positive impact on the communities in which they operate is quickly moving from niche to mainstream. There has been a shift towards fund managers taking an active role engaging with companies and providing stewardship, as well as an increase of passive funds incorporating ESG screening as part of their investment process.”
Fund managers are now having to demonstrate their ESG policies when raising capital from investors and LP’s. The logical next step is for fund managers to demand higher standards of ESG compliance and rigour in their current and potential investments.
Assets Under Management with an ESG focus have also demonstrated significant growth relative to the overall asset management industry. A recent report by the Thinking Ahead Institute showed that assets managed in ESG mandates grew by 23.3% in 2018, while total assets under management fell 3% from the previous year to $91.5trn (£71trn).
The study also concluded that assets managed according to ESG principles grew 17.8% in 2018, while client interest in sustainable investing, including voting, rose 83%
ESG factors should be a priority for company Boards and management, forming a vital part of corporate strategy. There are considerable advantages to proactively tackling ESG issues. A robust ESG program can open up access to large pools of capital, build a stronger corporate brand and promote sustainable long-term growth benefiting companies and investors alike.
Stellium can help open up the channels of communication to this growing pool of investors as part of an overall investor relations strategy. We are also expanding our advisory services in this important new area so please do get in touch if you would like to learn more.