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ESG

Performance, transparency and risk cited as the biggest barriers to sustainable investing — survey

Seventy-seven percent of institutional investors globally believe sustainable investing remains a challenge, with performance, transparency and risk concerns cited as the biggest barriers to its incorporation, said a survey from Schroder Investment Management released Wednesday.

Forty-four percent of respondents identified performance concerns as a hurdle to sustainable investing; 41% said "a lack of transparency and reported data"; and 28% cited risk measurement and management difficulties. Another 23% said cost was a challenge. (Multiple answers were allowed.)

While challenges remain, 48% of respondents reported that they've increased their allocation to sustainable investments over the past five years, and 67% believe sustainable investing will become more important over the next five years. Globally, 17% of respondents said they do not invest in sustainable investment strategies.

By geography, 60% of European respondents reported an increase in their allocation to sustainable investments over the past five years, despite being the region with the highest percentage of investors who find sustainable investing "very challenging" at 27%. Additionally, 48% of North American respondents reported an increase in their allocation, followed by Latin America, 43%; and Asia, 33%.

Latin American respondents were the most positive on sustainable investing's role over the next five years with 75% predicting is will be somewhat or significantly more important, followed by Europe at 74%, North America, 63%; and Asia, 59%.

Other findings from Schroders' survey include:

  • 76% of investors said sustainability should be a consideration with equity investments, followed by infrastructure at 49%, credit, 44%; real estate, 40%; alternatives, 29%. Another 17% said "none of the above." (Multiple answers were allowed.)
  • North American investors were the most positive on sustainability considerations for alternative investments at 43%, compared to 21% of Asian investors, 26% of European investors and 34% investors in Latin America.
  • By region, 23% of investors in Asia said they do not allocate to sustainable investment strategies, followed by North America at 22%, Latin America, 17%; and Europe, 10%.

Five hundred global institutional investors, including pension funds, endowments, foundations and sovereign wealth funds, were surveyed in June. Nearly half of the respondents were based in Europe, 200, followed by Asia, 150; North America, 115; and Latin America, 35.