Institutional sustainable investments up nearly 150% in 4 years

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Laxman Pai, Opalesque Asia:

The number of institutional investors reporting sustainable and impact-related investments has grown 146% since 2016, said a survey.

According to the Cambridge Associates biannual client survey, more than half (61%) of 2020 respondents were actively engaged in sustainable, impact, or ESG investing, a 25 percentage-point uptick from the 36% reported just two years ago.

Climate change and resource efficiency were 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.

Regionally, the U.K. and Europe led the way, with the 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.

“The rapid adoption of strategies that include environmental, social, and governance considerations reflects a growing consensus in line with our belief that these factors are material to long-term investment outcomes,” said Liqian Ma, Head of Sustainable and Impact Investing Research.

“Cambridge Associates partners with our clients to build resilient portfolios that seek to integrate all material risks and opportunities in the investment process. At the same time, we customize and align each portfolio to each institution’s financial and impact objectives,” Ma continued. The survey demonstrates that CA clients are increasingly taking a more holistic approach to integrate sustainability and impact in the investment process.

While all regions have seen an increase in sustainable and impact investing engagement, the UK and Europe have led the industry. Nearly a third of non-US respondents engaged in impact investing have over 50% of long-term portfolios allocated to sustainable investments, while half of US respondents have less than 5% allocated.

“Many of our clients see the integration of sustainability as a source of competitive advantage. We are particularly proud to be working with some real thought leaders in endowments and foundations who are setting ambitious objectives like the achievement of net carbon zero,” said Annachiara Marcandalli, Head of Sustainable Investing for Europe.

“We also see private wealth owners and family offices at the forefront of this trend, driven by a long-term time horizon that is a natural match to sustainable investments, personal values, and interests expressed by next-generation family members,” added Annachiara.

The 202 respondents of the 2020 survey represent a globally diverse group of institutions; however, the majority of respondents classify as foundations, colleges, and universities.