The proportion of institutional investors in alternative assets that consider ESG factors in investment decisions has risen significantly in the last three years, according to a new poll.
The survey published by alternatives fund manager LGT Capital Partners showed 85% of investors in private equity, real estate, private debt, infrastructure and hedge funds are now integrating ESG – up 10 percentage points over the last three years.
Findings in the research entitled ’The changing landscape of ESG and sustainable investing’ include the fact that climate change and human rights are seen as the most pressing issues among such investors, the Switzerland-headquartered firm said, adding that diversity and inclusion (D&I) was the ESG area that had seen the biggest increase in attention between this 2022 survey and the previous poll of 2019.
While environmental considerations had been a primary focus for investors for years, the firm said, it saw from the new poll that there had been a significant further increase in importance here, with 66% of respondents now saying the area that got the most attention in their investment activities – 15 percentage points more than three years ago.
Some 52% of the 230 investors quizzed by LGT Capital Partners now had policies to address climate change in their investment decision-making, the firm said, adding that another 36% planned to implement such policies in the next two years.
“Europe is ahead of other markets on issues relating to climate change, with 63% of investors having policies already in place, compared to just 23% of investors in North America,” it said.
Tycho Sneyers, a managing partner at LGT Capital Partners and board member of UN PRI, said amid more investor use of ESG considerations in decisions, the trend towards a stronger focus on outcome orientation had continued – particularly in relation to climate change and human rights.
“Diversity and inclusion is increasingly high on investors’ agendas, albeit at different stages of implementation in different regions,” he said.
In the poll, which questioned investors in alternatives – including pension funds, endowments and insurers – in 28 countries, human rights were shown to be the biggest social concern.
They were cited by 23% of respondents as the most important social concern in the latest survey, versus 20% in the 2019 exercise, while controversial weapons, which had been cited by 22% of investors in the 2019 poll as their most important social worry, were only picked by 19% as the main concern in the social category this time around.
But D&I was the social issue seeing the biggest rise in attention between the 2019 and 2022 surveys, according to LGT Capital Partners, being up five percentage points from three years ago.
The survey also showed that support for the UN Sustainable Development Goals (SDGs) remained strong among investors in alternative assets, LGT Capital said.
Some 92% of those responding said they believed the goals helped address pressing environmental and social issues, the firm said, adding that 80% said they also thought the SDGs helped create new investment opportunities.