More investors around the world are choosing not to use ESG principles in their investment approach than a year ago, according to a survey by Royal Bank of Canada’s asset management arm.
A poll of 799 investors, consultants, asset owners and clients found fewer investors were using ESG principles in their decision making in 2019, putting the number not using ESG in their investment approach to the highest percentage since 2017.
The findings also show that adoption has stagnated. The number that stated they ‘significantly’ used ESG principles in their investment approach stood at 24% of respondents – the same number as when the survey was conducted last year.
“Following several years of rapid growth in the adoption of an ESG-based approach by institutional investors, this trend is showing signs of tapering,” the report said.
“At a global level, the percentage of investors who said they used ESG principles as part of their investment approach and decision making in 2019 was relatively flat compared to last year.”
Despite the surprising results, there were regional pockets of growth in investment hubs such as the UK where ESG adoption has now reached 97%. This compares to Canada which polled at 80%.
Respondents told pollsters that performance was now the number one reason for incorporating some kind of ESG analysis in portfolio construction. More than half (53.1%) said the prospect of improved performance, lower risk and improved return was the reason to embrace ESG, up from 52.8% last year.
“One clear theme emerging from this year’s survey is an increase in the level of uncertainty around ESG,” the report’s author concluded in the summary.
“There appears to be a divergence of views about the value of ESG as it relates to investment performance, with significant adopters of ESG remaining confident in its value, but the balance of the survey sample expressing more doubts.”