Institutional investors' adoption of ESG
remains strong as anti-corruption, cybersecurity and climate change
are top ESG concerns
TORONTO, Oct. 13, 2021 /PRNewswire/ - The adoption of
environmental, social and governance ("ESG") integration remains
strong amongst global institutional investors, while a significant
group has also placed greater emphasis on ESG considerations as a
result of the COVID-19 pandemic, according to the 2021 RBC Global
Asset Management ("RBC GAM") Responsible Investment Survey.
The 2021 survey highlighted that while ESG adoption remains near
peak levels amongst institutional investors globally, there is a
sizable group of institutional investors (29%) who have placed
greater emphasis on ESG considerations as a result of the COVID-19
pandemic. These investors are also the most vigorous supporters of
ESG as an enabler of investment performance, as nearly all of this
group (97%) believe ESG integrated portfolios are likely to perform
as well or better than non-ESG integrated portfolios, a significant
difference compared to the overall global respondents who said the
same (83%).
Among this same group of investors who have strengthened their
commitment towards ESG incorporation as a result of the pandemic,
80% believe ESG integration helps generate long-term sustainable
alpha (versus 51% of the total respondents), and 88% believe that
ESG integration helps mitigate risk (versus 61% of the total
respondents). In addition, this group had the strongest
opinions on the diversity of corporate boards, with 70% saying
board gender diversity targets should be adopted (versus 47% of the
total group).
While the number of investors who use ESG appears to have
plateaued over the past several years, there remains a geographic
divide when it comes to adopting ESG principles. European investors
remain most committed to ESG adoption for the fifth straight year,
with 96% of European respondents using ESG in their investment
approach. In contrast, U.S. investors remain the most skeptical,
with just 64% of respondents using ESG. Although a strong majority
of Canadian investors adopt ESG principles, this year saw a slight
decrease, as 81% of respondents said they used ESG principles –
still a strong majority but down from 89% last year. Asian
investors continue to show an increase in ESG adoption, with 76% of
respondents using ESG principles this year, compared with 72% in
2020.
"The findings suggest that for the most ESG committed investors,
the COVID-19 pandemic has highlighted the critical importance of
hardwiring environmental sustainability and social equality into
their investment process," said My-Linh
Ngo, Head of ESG Investment and Portfolio Manager at BlueBay
Asset Management LLP. "The pandemic has impacted governments,
companies and individuals in unprecedented ways, and it will
continue to reshape how society and the economy operates going
forward. We think this presents a unique opportunity for investors
to review and recalibrate how they incorporate ESG considerations
into their investment practices."
"Over the past five years, our data has clearly demonstrated
that institutional investors are convinced of the merits of ESG
adoption, and are committed to incorporating ESG in their
investment approach to help mitigate risk and generate long-term
sustainable alpha," said Melanie
Adams, Vice President and Head of Corporate Governance and
Responsible Investment at RBC Global Asset Management. "In a year
where ESG risks such as COVID-19, high profile cyber breaches and
climate-driven weather events dominated headlines, it will be
interesting to see how perceptions toward ESG will continue to
evolve."
Other key findings from the survey include:
Investors are most concerned by anti-corruption,
cybersecurity and climate change: The RBC GAM survey asked
respondents to rank which ESG issues they are concerned about when
investing. Anti-corruption ranked first globally for a second
consecutive year. With the backdrop of recent headlines on
data-hacking incidents and ransomware attacks around the world,
cybersecurity jumped to the second-highest priority, after being
ranked fourth in 2020. Climate change was the third-highest
priority, after being ranked second last year.
European investors are paying closest attention to climate
change; regulation is a key driver for ESG incorporation: An
overwhelming majority of European investors (80%) said they address
climate risk in their investment policy – a 15 percentage point
jump from last year, and a significant divergence from other
regions (32% in Asia, 31% in
Canada and 20% in the U.S.). This
divergence could be attributed to the European regulatory
environment, as 45% of European investors said government
regulations are a top reason for incorporating ESG in their
investment portfolios, compared to just 12% of global
respondents.
Diversity on boards shows a split: Less than half of
global investors (41%) said corporate boards should adopt visible
minority diversity targets, almost unchanged from last year.
Conversely, investors who said these targets should not be adopted
by boards jumped to 35% this year, versus 28% last year. A similar
trend was also apparent for gender diversity targets on boards: 47%
globally said that boards should adopt gender diversity targets,
which was consistent with last year, while those opposed rose to
35%, up from 26% last year. Europe
and Canada had the strongest
support for gender diversity targets, at 57% and 54%,
respectively.
On fossil fuels, engagement continues to outpace
divestment: By a four-to-one margin, global investors said that
engagement (45%) is more effective than divestment (10%) within the
fossil-fuel free context, up slightly from 40% in 2020 and 39% in
the year prior. Over the last three years, there has been no
growing support for divestment amongst institutional investors,
indicating a clear preference for engaging in dialogue with
companies.
ESG in a Pandemic World is RBC GAM's fifth annual
global survey of institutional investors' perceptions regarding
responsible investment. For this year's report, RBC GAM surveyed
805 institutional asset owners, investment consultants and
investment professionals in the United
States, Canada,
Europe and Asia between May and July 2021.
About RBC
Royal Bank of Canada is a global financial institution with
a purpose-driven, principles-led approach to delivering leading
performance. Our success comes from the 88,000+ employees who
leverage their imaginations and insights to bring our vision,
values and strategy to life so we can help our clients thrive and
communities prosper. As Canada's
biggest bank, and one of the largest in the world based on market
capitalization, we have a diversified business model with a focus
on innovation and providing exceptional experiences to our 17
million clients in Canada, the
U.S. and 27 other countries. Learn more at rbc.com.
We are proud to support a broad range of community initiatives
through donations, community investments and employee volunteer
activities. See how at rbc.com/community-social-impact.
About RBC Global Asset Management
RBC Global Asset Management (RBC GAM) is the asset management
division of Royal Bank of Canada
(RBC) and includes RBC Global Asset Management Inc., RBC Global
Asset Management (U.S.) Inc., RBC Global Asset Management (UK)
Limited, RBC Global Asset Management (Asia) Limited, and BlueBay Asset Management
LLP, which are separate, but affiliated subsidiaries of RBC. RBC
GAM is a provider of global investment management services and
solutions to institutional, high-net-worth and individual investors
through separate accounts, pooled funds, mutual funds, hedge funds,
exchange-traded funds and specialty investment strategies. The RBC
GAM group of companies manage approximately $580 billion CAD in assets and have approximately
1,500 employees located across Canada, the United
States, Europe and
Asia.
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SOURCE RBC Global Asset Management Inc.