On the go: Sixty per cent of investors say greenwashing is an obstacle to their sustainable investment intentions, while active engagement is one of the key ways asset managers drive sustainable change, according to a report by Schroders.
Schroders’ Institutional Investor Study, which covers 650 institutional investors with $25.9tn (£20tn) in assets, found that 59 per cent of respondents said active company engagement “is key to integrating sustainability”, which compares with 38 per cent in the previous year.
There was a similar move away from exclusionary and toward “inclusionary” investment approaches, the former falling to 36 per cent from 53 per cent, with the latter rising to 61 per cent from 44 per cent.
Under inclusionary strategies, investors pick best-in-class companies or investments and engage with them to improve their sustainability ratings, while exclusionary approaches, like divestment, abandon investments in specific companies or sectors.
Environmental concerns were listed as the chief concern among respondents for the second year running, the survey noted, with only 12 per cent of respondents stating they do not invest in sustainable investments, down from 19 per cent last year.
Meanwhile, 68 per cent of investors said they expected sustainable investing to grow in importance over the next five years.
Greenwashing was identified as a challenge by 60 per cent of respondents, however. Greenwashing occurs when there is “a lack of clear, agreed sustainable investment definitions”, and can result, whether deliberately or accidentally, in a company boasting of green credentials that it has not in fact earned.
Forty per cent of respondents said the lack of transparency and reported data was hampering them in their attempts to invest sustainably, a 40 per cent rise on the same figure last year.
Andy Howard, global head of sustainable investments at Schroders, said: “Investors are asking more from their asset managers when it comes to sustainability, and those demands are becoming increasingly sophisticated.
“The evidence is consistently growing that sustainable investment and robust returns are not mutually exclusive. We welcome regulatory efforts to harness tangible action and help fight greenwashing.”
He added: “This should support delivering real change and allow investors to make informed decisions. At the same time, it is also crucial that asset managers and investors do not feel overwhelmed by these growing demands and amount of sustainability information.
“We are working closely with industry initiatives, policymakers and regulators to strike the right balance.”
