The challenge of measuring and quantifying the impact

Institutional investors are wanting more from their sustainable investments and asset managers. This is one of the results revealed in the Schroders Institutional Investor Study 2021 – spanning 750 institutional investors, collectively responsible for $26.8 trillion in assets.

This year’s results have highlighted that while Covid-19 has accelerated sustainable investing for institutions, sustainability still remains a challenge and measuring and quantifying the impact of investments has become a priority.

80 % find sustainable investing challenging
67 % cite integration as their preferred investment approach
64 % believe environmental issues are the most important engagement topic for asset managers
50 % identify greenwashing as the biggest challenge to investing sustainably

“Sustainable investing has grown significantly in recent years and the resulting attention from investors, regulators and asset managers has been inevitable. Added to the mix is the impact of Covid-19, which has affected all aspects of our lives with sustainable investing being no exception. The message from this year’s Institutional Investor Study is clear. Covid-19 has intensified the spotlight on sustainable investing, institutional investors need clarity on the goals and strategies fund managers employ and increasingly, many also want to know the impacts their investments deliver.” Andrew Howard, GLOBAL HEAD OF SUSTAINABLE INVESTMENT

COVID-19 & SUSTAINABILITY

Covid-19 has accelerated the importance of sustainability2020 was a truly transformative year. It fundamentally changed the way we live our lives but was also the year when we saw systematic change in how investors feel about sustainability. While we have consistently seen a growth in the uptake of sustainable investing since we began the Study in 2017, Covid-19 has accelerated this trend. This year, 52% of global institutional investors view the role of sustainable investing within their institution as more important because of Covid-19.

Inclusive approaches to implementing sustainability continue to be popular

When ranking in order of importance, integration and positive screening continue to be the preferred approach to implementing sustainable investing for global institutional investors, while negative screening remains less popular. This year’s results highlight that inclusive approaches are increasingly being viewed as an important aspect of driving change, rather than simply divesting.Investor attitudes are also becoming more specific, with growing demand for thematic investing and impact investing as they seek out specific environmental and social themes to make tangible impacts through the way they invest.

Real world outcomes and tangible results have become a key priority

Investor appetite and understanding around sustainability are becoming more sophisticated. When considering what successful engagement is, data suggests investors are beginning to move away from “having” to invest sustainably (because of regulatory requirements or corporate alignment) towards “wanting” to make an impact with their investments. This sentiment has been seen in this year’s results, where more than half of global investors have stated their primary driver to invest sustainably is the desire to positively impact society and the planet.

Regulatory and industry pressure (43%) continues to be an important motive, particularly as we have seen an unprecedented number of new regulations and standards emerge in recent years.This demand for making positive impacts translates not only to the investment decision making process of which companies to hold, but also the actions taken during the holding period. 57% believe that successful engagement equals a real world outcome which demonstrates a measurable improvement for a company’s stakeholders (customers, communities, employees, environment, regulators & governments, suppliers).

More information on the study including charts: Schroders Institutional Investor Study 2021