Schroders survey of 650 institutional investors managing $25.9tr worldwide signals surging interest in active company engagement on green issues
Active engagement with companies is now widely regarded by investors as a crucial mechanism for driving climate and environmental action, according to a major survey of 650 institutional investors, but asset owners' efforts to accelerate the adoption of credible decarbonisation strategies is being hampered by 'greenwashing' from corporate boardrooms that offer scant details on their sustainability plans.
That is the key headline from a major annual survey undertaken by asset management giant Schroders, which assesses the views of institutional investors managing $25.9tr across 26 different countries. The report found that for the second year running environmental issues were the most important engagement issue for shareholders, but at the same time frustration is building at the failure of some firms to come forward with sufficiently ambitious and quantifiable climate strategies.
Rather than divesting from companies which fail to take requisite action to tackle environmental impacts, the survey results pointed to a strong preference amongst asset managers for engagement policies that require transparent reporting and tangible outcomes from corporates backed by investors consistently deploying shareholder resolutions to vote in favour of more ambitious green strategies.
Almost 60 per cent said active company engagement was key to driving sustainability, a significant leap from the 38 per cent who highlighted the importance of engagement in Schroders' institutional investor survey last year.
Meanwhile, just 12 per cent of investors said they did not hold any environmentally sustainable investments, down from 19 per cent a year ago. And in further evidence of the growing appetite for so-called environmental, social, and governance (ESG) assets, over two thirds of respondents said they expect sustainable investing to grow in importance over the next five years.
Reasons cited for the growth in sustainable investing were a desire to align investments with corporate values, responding to regulatory and industry pressure, and a belief that such investments can drive higher returns and lower risk, according to Schroders.
However, as sustainable investing has become an increasingly mainstream investment consideration, the study found 'greenwashing' has emerged as a significant challenge for investors. Some 60 per cent of investors felt greenwashing - "a lack of clear, agreed sustainable investment definitions" - was the most significant obstacle to delivering on their sustainable investment goals.
In addition, almost half of investors - 48 per cent - said a lack of transparency and reported data was restricting their ability to invest sustainably, up from 40 per cent a year ago.
Indeed, 55 per cent of respondents - up from 49 per cent a year ago - said data and evidence that proves investing sustainably delivers better returns would encourage them to increase their green investment allocations.
Elly Irving, head of engagement at Schroders - which manages around £500bn of assets - said the survey results showed investors were demanding more from their asset managers when it came to sustainable investment, and that those demands were becoming increasingly sophisticated.
"Active ownership has become more important than ever," she added. "Investors have a duty to hold companies accountable and an opportunity to drive positive change."
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