Our Global Investor Study 2020 reveals investor and consumer views on company responsibility for tackling climate change, writes Schroders' Vicki Owen
Companies' wider social impact is the sustainability issue investors care about most, according to the latest Schroders Global Investor Study.
The landmark annual survey of more than 23,000 investors from around the world asked respondents for their views on sustainable investing. Conducted across 32 locations worldwide between 30 April and 15 June 2020, the study suggests 70 per cent consider social factors of key importance. This is closely followed by environmental issues, at 67 per cent, and treatment of staff, at 66 per cent.
The 'new social contract': these are the behaviours investors care about most
This year's respondents are likely to have had the impact of Covid-19 and restrictions on their local communities front of mind. In the months after the World Health Organisation declared Covid-19 a pandemic, it was widely recognised that a sustainable recovery was needed.
In the wake of the virus, there have been rising calls for governments and businesses to be part of a 'new social contract', something Schroders' CEO has spoken out about. This has coincided with the 20th anniversary of the United Nations Global Compact, the world's largest corporate sustainability initiative.
Interestingly, the behaviours people deemed to be the most important from a sustainability perspective are also considered the most impactful on returns.
Figure 1: Most important company behaviours vs most positive impact on return
Who do people think should be responsible for mitigating climate change?
Questions have been asked about what Covid-19 could teach us about tackling climate change. Schroders' Climate Progress Dashboard suggests the current pace of change will result in temperatures rising by 3.9°C above pre-industrial levels - almost twice the Paris Agreement target.
When it comes to who people think should be responsible for mitigating climate change overall, nearly half (46 per cent) said investment managers or major shareholders have a role.
Schroders' study found 69 per cent think national governments and regulators are responsible for mitigating climate change, while more than half (59 per cent) see this issue as something individuals should take responsibility for as well.
Some 61 per cent of those surveyed hold companies themselves accountable - almost as many as the two-thirds who pointed to governments and inter-governmental organisations.
"It is clear from the responses that a number of different groups have a part to play," said Hannah Simons, head of sustainability strategy at Schroders. "This highlights the need for engagement and collaboration. Collective action is needed."
Figure 2: Who should be responsible for mitigating climate change?
What should investment managers do with investments in companies involved in fossil fuels?
Although less than half of people consider investment managers responsible for mitigating climate change, 58 per cent of people think they should withdraw funds from the fossil fuel industry.
Just over a third (36 per cent) said managers should withdraw investment from companies involved in the fossil fuels industry to limit their ability to grow. However, over a quarter (27 per cent) said managers should remain invested to drive change and 14 per cent said they should stay invested as long as it is profitable.
The remaining 22 per cent said investment managers should withdraw investments from these firms on moral grounds.
Figure 3: What should companies do about those involved in the fossil fuel industry?
The findings suggest that while investment professionals are not explicitly blamed for carbon emissions levels, they are expected to become more involved in reducing them.
The difference in opinion on the fossil fuel industry is a reminder that there are differing interpretations of what it means to make responsible and sustainable investment decisions.
"Sustainable investing means different things to different people. It is important for people to understand the credentials of their investments to ensure their portfolio aligns with their own values," said Simons said. "As we seek to deliver not only returns for investors, but better outcomes for society as a whole, measurement and tracking of progress remain critical. The tools that we have developed and the analysis we undertake put a financial value on the impacts that companies have on society - which are increasingly being identified as financial costs."
She added: "At Schroders we are committed to integrating sustainability across everything we do. It is clear that the financial sector plays a key role in tackling climate change, and we believe this requires a forward-looking, active approach."
Vicki Owen is content editor at Schroders, which is a partner of BusinessGreen's Net Zero festival.