Union Investment Survey: What motivates Germany’s ESG investors
The intensive sustainability debate of recent years has left its mark on the portfolios of institutional investors in Germany. The majority of investors assume that the importance of sustainable investment strategies will continue to grow in the future. 83% expect ESG investment volume to rise very strongly. Union Investment has conducted a comprehensive survey to identify the latest ESG trends.
Currently, few institutional investors still do without ESG investment strategies. For example, the proportion of major investors who invest sustainably has recently risen to a record level of 80%. That is a key finding of the sustainability study conducted annually by Union Investment. This year, 166 major investors with a capital volume in the trillions took part in the survey.
In this context, the investors’ knowledge of sustainable investment has grown. Five years ago, only 38% of those surveyed rated their level of knowledge as good or very good, whereas 60% now expressed the same opinion. There has also been a significant increase in the proportion of investors who are satisfied with their sustainable investments. In the past five years, it has risen from 43% to 56%.
More than half (56%) of all assets of sustainability users are invested according to ecological, social, ethical or governance criteria. As expected, the proportion of 75% is particularly high for churches and foundations. However, insurance companies also have a high value at 66%.
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The exclusion criteria are dominant
Exclusion criteria predominate in the procedures for selecting sustainable investments. 92% of sustainability users use them. At the same time, however, three-quarters (74%) of those surveyed are against excluding companies from sustainable portfolios where a transformation to a sustainable company is planned but not yet completed.
“Investors are particularly interested in companies that are undergoing change. As an active and sustainable investor, it is important to find and support them in good time before the market discovers their potential,” said Alexander Schindler, member of the Management Board of Union Investment responsible for institutional client business.
The exclusion criteria are followed by negative screening at 72%, positive screening at 58% and the best-in-class approach at 55%, depending on the frequency of application. In contrast, only one third of investors (34%) use engagement, although it is precisely this active dialogue with the issuers of their own investments that 57% of those surveyed consider to be particularly effective. “Although the commitment as an active shareholder is costly, it is a very effective instrument for implementing the sustainability preferences of investors in a targeted and long-term manner. For this reason, it is expedient for institutional investors to use engagement approaches via outsourcing mandates.”
The sustainable investment strategies will increase in importance
The vast majority of investors assume that the importance of sustainable investment strategies will continue to grow in the future. 83% expect ESG investment volume to rise very strongly or sharply in the next twelve months, 14 percentage points more than in the previous year. Above all, 70% of those surveyed cite ongoing regulation as the main reason for a more intensive focus on sustainable investments. Just as many investors consider climate policy regulation to be fundamentally sensible and believe that sustainable investments can have a positive influence on the development of the global climate.
Investors in Germany agree on one important point: The sustainable restructuring of the economy will reshuffle the cards and bring new opportunities and risks for the capital markets. However, not all sectors and business fields offer the same opportunities. Major German investors see above-average potential for sustainable investments above all in the energy sector (95%) and in the transport and mobility sector (93%).
The high level of investor satisfaction with ESG investments can also be attributed to their performance
Only two out of 130 respondents who invest sustainably and conventionally stated that the return on their sustainable investment was worse than that of conventional portfolios. At twelve percent, however, the return was significantly better.
With regard to the risk of their sustainable portfolio, 25% see clear advantages here. Around half of the investors said that the sustainable and conventional portfolios performed similarly in terms of performance (59%) and risk (46%). “This confirms the findings of various studies, which generally find no yield disadvantages with regard to sustainable strategies and even see slight advantages in ESG strategies. Even in the current corona crisis, sustainability-oriented strategies seem to have done somewhat better than conventional approaches so far,” Schindler noted.
(Featured image by geralt via Pixabay)
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First published in INSTITUTIONAL Money.com, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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