27 September 2019

Investment & Pensions Europe: Investors ‘still believe ESG investing limits returns’

More than half of professional investors still believe that incorporating environmental, social and corporate governance (ESG) factors into their investment strategies will limit their overall returns, according to a survey by NN Investment Partners.

Across the sample, German investors were most pessimistic, with 80% saying responsible investment strategies would reduce investment returns. More than 70% of Italian and Dutch investors felt the same way, NN IP reported.

However, the asset manager also found that investors were willing to sacrifice returns to support ESG or responsible investing goals. On average, investors said they were prepared to forgo 2.4% a year if it meant their investments had a positive, non-financial, impact.

The €268bn Dutch asset manager argued that its own research had demonstrated that incorporating ESG factors into investment strategies did not necessarily negatively impact returns.

Jeroen Bos, head of specialised equities and responsible investing at NN IP, said: “While it is great to see that investors are prepared to give up a proportion of their returns to contribute to a more sustainable world, research actually shows that ESG integration does not automatically lead to lower returns.

“For example, a metastudy incorporating the conclusions from around 2,200 academic studies conducted between the early 1970s and 2014 revealed a positive relationship between corporate ESG scores and financial performance in the majority of cases (63%).”

Claims that investors must surrender returns to engage in responsible investment were “flawed”, Bos added.

NN IP has established an academic collaboration with Yale University in the US to investigate the theme further, while a previous research partnership with the University of Maastricht reported that “integration of ESG factors such as momentum and focus on behavioural aspects in this area can improve risk-return of investment portfolios”, Bos said.

Full article on IPE

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