2020 appears to be the year in which Social, the “S” in ESG emerges as a key element in investors’ sustainability considerations. BNP Paribas Asset Management (‘BNPP AM’) today reported the results of an investor survey, with findings suggesting that since the onset of the COVID-19 crisis, investor focus on ESG, and on social considerations in particular, has seen a marked rise.
The study, conducted by Greenwich Associates, found that nearly all investors either take ESG factors into consideration in their portfolios, or plan to do so in the future, and nearly a quarter of respondents reported that ESG has become “more of a focus/more important” as a result of COVID-19. While social criteria are increasing in importance in investors’ minds, many cite a lack of standard metrics as an impediment to investment in these factors.
Frédéric Janbon, CEO of BNPP AM, said:
“The Covid-19 crisis has clearly prompted a shift in investor perception of social factors, which are now widely seen as having a critical and positive impact on long-term value creation and risk mitigation. It has also highlighted the interconnection between the way in which companies approach social issues such as treatment of employees or addressing inequalities in their long-term sustainability strategy. At BNPP AM, we engage with the companies in which we invest with regard to social issues and all aspects of ESG. We encourage companies to evolve and improve their social behaviour, thereby reducing risk and enhancing the sustainable returns that we can deliver to our clients.“
Specific findings of the survey include:
- 81% of respondents already employ ESG in all or part of their portfolios and a further 16% plan to do so
- 79% cite social considerations as having a positive impact on long-term investment performance and risk management. The importance of social criteria rose 20 percentage points from before the crisis
- 42% highlight lack of established standard metrics as a barrier to investing in social considerations
- Leading reasons for ESG investment: positively impact society or the environment (80%), reduce risk (58%) and meet stakeholder needs (47%)
- In terms of the social issues respondents considered, the most important elements cited were labour standards (38%), excluding harmful investments (31%), human capital management (23%), gender equality (22%), and community involvement (11%).
Jane Ambachtsheer, Global Head of Sustainability at BNPP AM, comments:
“While social factors are an extremely important component of companies’ ESG scores, they have often been perceived as less prominent. This can be attributed in part to the fact that the nature of social indicators can seem less tangible or measurable, with standards that are more likely to vary by region – however, the same can hold for environmental and governance factors. We continue to put significant focus on accessing and utilising data and research on a range of ‘S’ indicators, including classic topics such as gender diversity and labour standards, as well as a deeper dive into other business practices that can support more inclusive growth.”
Click here to see BNPP AM’s survey results.