Private-banking clients are increasingly taking ESG factors such as biodiversity into account as the Covid-19 pandemic has raised their desire to invest in line with their values and to manage potential risks in their portfolios, according to a survey by Deutsche Bank.
Three quarters of the 2,130 clients surveyed around the world by the chief investment office (CIO) of Deutsche Bank’s International Private Bank (IPB) said their investments should have a positive impact and 57% said the pandemic had contributed to that view.
“ESG has become more and more important in investment decision-making,” said Christian Nolting, chief investment officer.
Just over half – 5% percent – said that investing based on ESG can help manage risk in their portfolios and 74% said the pandemic has highlighted the importance of managing risk.
ESG investor knowledge is currently obtained from a variety of sources. Perhaps surprisingly, traditional news media are the most important category, according to the survey, although there is “clearly an important role for financial firms in providing information and promoting discussion”, said Deutsche Bank.
Moreover, “despite social media not being a popular option amongst our overall survey population, we believe that the emerging Millennial and later Generation Z (born 1997 onwards) population will be much more engaged on this information channel as discussed before, and financial organisations can contribute here too,” it added.
The “E” pillar is the focus of many investors’ attention. Some 47% of respondents regard the “E” pillar as the most important to them personally (with smaller shares for “S” and “G” pillars). Among respondents, 46% believe all environmental issues are already negatively impacting the global economy – although, at the other end of the spectrum, 3% do not believe in a severe negative impact on the global economy stemming from climate change or biodiversity loss.
Within the “E” pillar, climate change is regarded as the most important factor in investment decision making (46% of respondents). Approximately 37% see ocean and land degradation (taken together) as most important but biodiversity lags some way behind this at 11%.
While biodiversity loss was highlighted by only a few respondents as the most important environmental factor, around half recognised the need to incorporate it into their investment decision-making because of its likely role in exacerbating ocean depletion and land degradation, and accelerating climate change.
“Biodiversity underpins many environmental, social and governance systems and biodiversity loss is therefore likely to be an increasing focus of public and investor concern,” said Nolting.
Other findings of the survey include that women were more likely to say their investments should have a positive impact and to focus on the social pillar of ESG; millennials tended to be more focused on ocean pollution than their older counterparts; and while 54% of small- and medium-sized enterprises regard climate change as the main ESG issue in their business only 26% actually have a dedicated ESG strategy.
The online survey of IPB clients aged 26 to 70 was conducted in April 2021. It included respondents from 10 countries or regions around the world, including Belgium, Germany, Hong Kong, India, Italy, Singapore, Spain, Switzerland, the UK and the US.
The survey did not break down responses by country or region.