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Mar 01, 2018

Alternatives and ESG top priorities for institutional investors

Investors seeking alternatives to diversify portfolio risk

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.

The IR Magazine Forum & Awards - Greater China

Taking place on Friday, November 30 in Hong Kong, this year’s event will begin with our forum, where investors, analysts and heads of IR from small, mid and large cap companies come together to discuss key issues relating to investor relations, corporate governance, shareholder needs and the role of senior management teams in IR. This will be followed by our prestigious awards ceremony, which celebrates the success of both individuals and companies that are leading the way in IR across Greater China. 

We have a fantastic agenda planned, with sessions including:

  • Q&A with international investors, buy-side and sell-side analysts: IR post-Mifid II globally
  • Global trends, trade wars and Trump: Impact on investor sentiments, IPOs and IR
  • Investor-centric ESG reporting: New regulations, what attracts investors and what doesn’t

Find out more about the forum and awards here.