Environmental factors are the most likely to drive investment returns in the coming years, according to a poll of professional investors.
Of the 290 investors polled by fund group NN Investment Partners in its 2019 Responsible Investment Survey, it found that 66% believe environmental metrics are the most likely to impact investment performance in the years ahead.
In a statement accompanying the findings, the company said that growing public awareness of climate change, coupled with issues such as resource scarcity, global population growth and social injustice had increased investors’ focus on ESG considerations more broadly.
“Currently environmental issues are high on the political and economic agenda as there is a clear correlation with returns, so it is not necessarily surprising that investors tend to focus more on the ‘E’ of ESG,” said Adrie Heinsbroek, principal for Responsible Investment at NN Investment Partners.
“Climate change, pollution and global warming are prominent issues and positive impact is, for example, in terms of reduced CO₂ emissions or waste, more quantifiable and easier to report on. But from a portfolio diversification perspective, it is important to also look at social and governance factors as these criteria can also help pinpoint plenty of opportunities.”
Within environmental metrics, some 87% of those polled said that energy transition from traditional fossil fuels to renewables has considerable potential to drive investment returns, followed by climate change (81%) and pollution (78%).
“Our own analysis also shows that the range of companies that score well on ESG criteria globally is bigger and much more diverse than many might think,” explained Heinsbroek.
“So in addition to incorporating environmental factors, the NN IP approach is to offer strategies that already take governance factors into account and also have a strong social focus – to offer investors long-term, sustainable benefits and attractive risk-adjusted returns.”
