Most institutional asset owners are moving toward fully integrating ESG into their investment processes and more of them have thematic strategies for making an impact on specific issues, like climate change or the environment, according to a report released Tuesday by Coalition Greenwich and AGF Investments.
Analytics provider Coalition Greenwich conducted 151 telephone and online interviews with corporate and public pension funds, endowments and foundations in North America and Europe that are participating in an ongoing Coalition Greenwich study.
A 2016 study found that half of asset owners had incorporated some element of sustainability into their investment processes. Five years later, the share is now 72%.
By 2026, nearly 8 in 10 institutions expect to have adopted sustainability criteria into investment decision-making processes, and 65% anticipate actively implementing sustainable investing, according to the report.
About two-thirds of institutional investors participating in the study said that in the past three years, they have increased their use of sustainable thematic investment strategies focusing on one or more areas, with potential for both attractive investment returns and positive impact.
"Institutions are increasing allocations to sustainable thematic investment strategies because many asset owners believe they can generate greater impact than ESG integration approaches while acting as a source of alpha by identifying investment trends earlier than other approaches," said Davis Walmsley, head of client relationships at Coalition Greenwich and author of the report, Targeting Impact: Integrated ESG and the Role of Thematic Strategies in Asset-Owner Portfolios, in a news release.