Investors’ thumbs-up for ESG analysis of real assets

Despite the complexity, 90% of investors now say ESG is important for real estate and infrastructure

Professional investors now believe environmental, social and governance factors are an important consideration for so-called ‘real asset’ investments such as real estate and infrastructure.

A poll of 500 insurance and pension fund decision makers, conducted by Aviva Investors as part of its 2020 Real Assets Survey, found 90% of respondents believe that ESG is now an “an important factor” in real asset investments.

The application of ESG analysis to areas such as real estate has been hotly debated in recent years, given the difficulties that some investors say they experienced scrutinising the approaches of fund managers.

It comes as the investment group predicting significant growth in these types of investments amid uncertainty over global growth and the ongoing low interest rate environment.

“The growing influence of ESG is another undeniable trend, however the lack of readily-available information can create difficulties in quantifying the ESG credentials of a project,” said Mark Versey, chief investment officer of Avia Investors Real Assets.

“This makes integration complex and something that must be undertaken on a case-by-case basis.”

Just over a quarter of those pension funds surveyed said they believed it is becoming difficult to find “suitable opportunities” in the real assets space which is preventing them increasing existing allocations.

The research found that institutional investors at insurers were more likely to consider the transparency of a fund manager’s ESG policy than those at pension funds. Half of insurers said they would consider the transparency of their fund firm, compared to just 41% of pension funds.

Pension fund investors said they had a preference for allocations to direct real estate (53%) and infrastructure equity (53%) and structured finance (52%).

“Strong appetite for Real Assets is unsurprising given the continued global backdrop of political and economic uncertainty,” Versey added.

The full survey is available here.

Related: Turning ESG analysis into valuation