Alternatives and ESG top priorities for institutional investors
Alternative investments and ESG-related issues are highlighted as being top of mind for global institutional investors in a new survey.
On alternatives, 70 percent of the 500 global institutional investors polled by Natixis Investment Managers are looking to this asset class as ‘essential’ to invest in ‘to diversify portfolio risk’, and 57 percent believe investing in alternatives is ‘necessary to outperform the broader market’.
Breaking this down into alternative strategies, investors cite global macro (47 percent), commodities (41 percent) and infrastructure (40 percent) as the best options for diversification.
Institutional investors also state the importance of ESG issues, with 60 percent saying they integrate ESG investing into their approach. ‘More and more institutions are integrating non-financial factors such as social, environmental and governance issues into standard investment analysis and manager selection processes,’ the report’s authors note.
Fifty-nine percent of respondents say there is ‘alpha to be found in ESG investing’, while 56 percent believe ‘ESG [investing] mitigates risks’ and 61 percent agree that ‘incorporating ESG into the investment strategy will become a standard practice within the next five years’.
‘Institutional investors have borne witness to the impact of environmental, social and governance events at numerous companies in recent years and watched as stock values declined right along with corporate reputations,’ Dave Goodsell, executive director of the Natixis Center for Investor Insight, says in a statement. ‘Our survey shows ESG analysis is playing a greater role in institutional strategy, with more institutions finding that this approach can help navigate a path to potential profits.’
The report also observes that ESG may still need a clearer definition, however. ‘Institutions are split on ESG and how to best approach it,’ the authors write. Thirty-six percent limit it to the use of negative and exclusionary screening – the hallmark of more traditional SRI strategies.
Twenty-one percent of respondents see it in positive terms through impact investing and only a small number – 15 percent – see the full potential of ESG today and consider thematic investing around global themes such as climate change and technology innovation.
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