By: Stephanie Maier, Global Head of Sustainable Investment, FTSE Russell
We recently published our eighth annual Sustainable Investment Asset Owner report which explores trends in sustainable investment adoption while revealing many asset owner’s priorities, concerns and approaches to key risks and opportunities. The report provides key findings that highlight asset owners are increasingly upbeat about sustainable investment data and regulation, and for the first time they are implementing sustainable investment more often through passive than active investment strategies.
What are the key findings from the 2024 FTSE Russell Sustainable Investment Asset Owner survey?
Our annual Sustainable Investment Asset Owner survey shines a spotlight on some favorable trends. Asset owners are indicating sustainable investment regulation is not majorly impeding sustainable investment adoption, their confidence in sustainable investment data is growing, and their priorities are shifting to different resources and passive investment strategies.
Larger asset owners are leading the implementation of sustainable investment as a core and integrated component of their total investment strategy. A very large majority (86%) of asset owners with AUM of US$10 billion or more say they are implementing sustainable investment considerations as part of their investment strategies. However, this finding compares to 63% of those asset owners with AUM of under US$10 billion.
Globally, despite challenging conditions and macroeconomic headwinds, the evaluation of sustainable investment themes and the implementation of sustainable investment policies and practices remains a major focus area for asset owners globally; 74% of asset owners surveyed are implementing and evaluating sustainable investment considerations in their investment strategy.
What challenges are asset owners facing when trying to meet sustainable investment regulatory requirements?
Asset owner sustainable investment strategies are becoming more sophisticated, and institutions require reliable data and analytics that they can trust. Our findings show that many asset owners are becoming more confident in using sustainable investment data.
However, our survey shows, when it comes to meeting regulatory requirements, the top challenge that over half (51%) of asset owners cite is being unable to align their portfolio or index with sustainable investment or climate considerations. This reflects the increasingly quantitative approaches being applied by investors to align portfolios to very specific climate objectives and increasing scrutiny from regulators.
Index providers will continue to play a key role in providing asset owners with the solutions, data and insights they need to effectively tackle the challenges they face within the evolving sustainable investment landscape, which includes aligning portfolios in accordance with sustainable investment and climate regulatory guidance.
How are asset owners implementing sustainability considerations into their investment strategies?
As confidence in available SI data grows, the types of strategies asset owners are choosing are evolving. Our findings highlight that the ongoing progression of greater allocation to passive investment strategies in the wider financial markets is mirrored in assets owner circles. There has been a meaningful and sustained shift towards passive sustainable investment strategies, which are now directionally overtaking active ones for the first time. Sustainable investment considerations are still being implemented with a hybrid approach to active and passive, however this is the first year in our annual surveys where respondents have indicated that there is now more focus on sustainable investment in passive than in active strategies.
Originally posted on October 24, 2024 on LSEG blog
PHOTO CREDIT: https://www.shutterstock.com/g/Studious
VIA SHUTTERSTOCK
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