Impact investment is now a widespread strategy among institutional investors in the Nordic region, according to a new survey that shows 43% of the entities currently invest using this environmental, social and governance (ESG) approach.

A study commissioned by NN Investment Partners (NN IP), which is part of the Dutch NN Group, and conducted by Copenhagen-based consultancy Kirstein among Nordic institutional investors also revealed that nine out of 10 investors were interested in impact investing, and 22% had plans to invest in impact strategies.

However, NN IP also said allocations to impact investing – using capital to bring about positive changes rather than simply avoiding harm – were still limited to 5% of portfolios.

Some 19% of respondents said they had no plans to invest in impact strategies and 16% were undecided, in the poll carried out between July and September last year.

Edith Siermann, head of fixed income and responsible investing at NN IP, said: “Nordic institutions, especially those in Sweden, are leaders in the field of ESG integration, but investors across Europe and globally display a clear desire to improve.”

She said impact investing was seen as an approach with “a wide range of untapped opportunities to create sustainable, long-term investments.”

“There are hurdles to be overcome, including the limited size of the investable universe, fee models that are out of sync with the going rate for impact strategies and the complexity of allocating to SDGs,” she said.

While the last decade had been about exclusion, Siermann predicted the focus in the next 10 years would be on how to measure and increase impact.

Most respondents in the survey indicated that they expected impact strategies to either perform in line with markets, or to outperform – regardless of whether they were already investing.

Of those institutional investors that already had money in impact investment, 75% said they expected returns to be in line with market performance, with 12% expecting limited or strong outperformance and 13% foreseeing limited underperformance from the strategy.

Strangely, limited outperformance was the result expected by 43% of respondents that did not invest in impact strategies and had no plans to do so, with another 43% segment of this group expecting market-like performance.

The report’s authors said it was interesting, and even counterintuitive, that 43% of those not expecting to invest still thought impact investing could lead to some outperformance.

“The explanation for this could be that they are restricted in their investments, for example, by internal guidelines, which does not alter their perception of impact,” they wrote.

The study took in quantitative data from 37 institutional investors based in Denmark, Sweden, Norway and Finland, constituting a representative sample of the full Nordic institutional market in terms of number, size and segment, NN IP said.

Their combined assets were €925bn, about two thirds of total Nordic institutional assets, the firm said.