ESG: Survey Results & Key Themes

Climate Change, ESG Risk & Return Optimisation

With an investment theme like ESG it can be easy to say ‘you have to be in it’, or ‘everyone is doing it’, and difficult to understand the specifics of what that means. Indeed, there are still question marks over whether ESG investing makes sense from a risk and return standpoint, or whether a focus on ESG has inevitable investment return costs. Our latest selection of papers leads off with two large scale investor surveys to give some detail on how allocators are approaching ESG, and includes thought leadership on ESG risk in sovereign debt, return optimisation, and sustainability policy.

SURVEY FINDINGS

Engagement and Biodiversity Lead 2022 Global Climate Survey (Robeco)

Robeco presents the key findings and data on investors’ approach to climate change, showing the increasing realisation of the importance of biodiversity and the respondents' intentions to increase engagement and active ownership. Results suggest that ESG integration alone is not enough for many investors.

Think EQuilibrium: 2022 Global institutional investor study (Nuveen)

More than 800 asset owners and consultants from across the world contributed to this study. The vast majority believe the carbon transition confers fresh investment opportunities, whilst on the social pillar around half have, or are considering, allocations in social investments.

CLIMATE RISK

Managing the Net-Zero Transition (BlackRock, 2022)

For compliance reasons, this paper is only accessible in the United States and Canada

The transition to decarbonise the world is happening. Understanding how the journey will unfold in years to come has never been more important for companies and investors alike.

Tackling the Biodiversity Challenge (Franklin Templeton Investments, Mar 2022)

For compliance reasons, this paper is only accessible in the EMEA region

The authors consider the importance of halting biodiversity loss, including how asset managers can and should be addressing the challenge. The paper encourages an understanding by financial institutions, especially of the risks from not tackling potential losses attributable to nature.

ESG RISK & BONDS

Anticipating the Climate Change Risks for Sovereign Bonds (FTSE Russell, 2022)

For compliance reasons, this paper is only accessible in certain geographies

FTSE Russell covers climate scenarios including a suggestion that many countries may exceed the emissions that would limit to 1.5°C the temperature increase by 2050. They put forward that such unchallenged climate change would call into question sovereign financial stability, including probability of default.

Understanding ESG risk in EM Sovereign Debt (PineBridge Investments, Mar 2022)

It is increasingly recognised that emerging markets will have a key part to play in hitting global sustainability goals. This article will help investors better understand ESG considerations as they relate to sovereign bonds, the main route into EM debt for many.

RETURN OPTIMISATION

Risk and Reward Q1 2022 (Invesco, Mar 2022)

For compliance reasons, this paper is only accessible in certain geographies

To help investors towards ESG return optimisation, this research magazine from Invesco includes articles on managing tracking error and trading costs through optimised sampling for ESG integration, and climate risk considerations for real estate investors.

The Link Between ESG and Financial Productivity (Lazard AM, Mar 2022)

The debate still rages on whether ESG strategies can outperform their equity counterparts on a consistent basis. Lazard AM’s paper directs investors to ‘compounders’, companies with strong financial productivity backed up by supportive ESG characteristics.

POLICY & REGULATION

Making Sense of Sustainability: A policy perspective (State Street, Mar 2022)

State Street looks at sustainability policy and regulation as it affects the global financial services industry. They highlight five key points as priorities, including the need for a universal taxonomy, adequate governance, and incentives for carbon markets.

Central Banks’ ‘Green Shift’ and the Energy Transition (OIES, 2022)

With the energy transition underway, there is increased attention on public policy. This paper details central bank climate policies with a focus on the ECB and the Bank of England and what part central banks can play towards greening the financial system.