Sustainable investing surges among institutional investors – survey

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The number of institutional investors reporting sustainable and impact related investments has grown 146% since 2016, according to a Cambridge Associates biannual client survey.

Climate change and resource efficiency was the most common focus, followed by social equity and inclusion. More than a third of institutions engaging in sustainable and impact investing consider racial and/or gender equity in investment decision-making, and another third anticipate doing so in the future, found the, survey released Wednesday.

Clients reporting in 2020 that they are actively engaged in sustainable, impact or ESG investing grew 25 percentage points, to 61% from 36% in 2018. That is a 146% increase from the first survey in 2016. Most of the 202 respondents are foundations, colleges and universities.

One recent trend reported by clients was a shift to ESG integration from negative screening.

Regionally, the U.K. and Europe led the way, with implementation of sustainable and impact investing growing 250% over the last two years, compared to 22% growth in the U.S., according to the survey.

Impact investing was also more robust outside the U.S. In the U.S., half of the survey respondents reported having less than 5% allocated, whereas nearly a third of non-U.S. respondents said they had more than 50% of long-term portfolios allocated to sustainable investments.

Liqian Ma, head of sustainable and impact investing research for Cambridge Associates, said in a statement that the rapid adoption of sustainable strategies reflects a growing consensus that ESG factors are material to long-term investment outcomes, and Annachiara Marcandalli, the firm’s head of sustainable investing for Europe, said that many clients there see it as a source of competitive advantage.

Clients not engaging in sustainable and impact investing mainly cited how their mission is addressed through programmatic activities, but more than one-third said they anticipate engaging in it at some point and most within two years.