RBC GAM Survey: ESG Integration Slips in US, Grows Elsewhere, as US Investors Skeptical on Performance
RBC Global Asset Management released the results of its annual Responsible Investment Survey, with findings indicating that conviction amongst US institutional investors regarding the investment performance merits of ESG integration has slipped somewhat relative to investors in other regions. Use of ESG factors in investment actually declined slightly among US respondents, while growing significantly in all other regions.
The 2020 RBC Global Asset Management Responsible Investment Survey was answered by over 800 participants from around the world, including the US, Canada, Europe and Asia. The survey covered a broad range of investor types, from family offices to pension plan sponsors, and AUM levels, from less than $100 million to over $25 billion.
On a global level, RBC GAM reported that the survey found that investors increasingly believe in the performance attributes of ESG integration, with 84% of respondents expecting that ESG-integrated portfolios will perform as well or better than non-ESG-integrated investments. Attitudes on this factor, however, vary greatly by region, with 97.5% of Canadians agreeing, along with 96% of Europeans and 93% of Asians, but only 74% of US investors. In fact, the US was the only region to see an actual decline in this metric, falling from 78% last year.
Given the lower conviction among US investors in the performance merits of ESG investing, it is perhaps not surprising that US respondents were the only to show a slight decline in the use of ESG factors, with 65% reporting that ESG factors are used significantly or somewhat as part of the investment approach and decision-making. Investors from other regions were far ahead on this metric, with each increasing over prior year levels, with Canada at 89% (vs 80% LY), Europe at 94% (vs 90%) and Asia showing a major jump to 72% vs 46%.
Other key findings from the survey include:
- COVID-19 impact. Over 28% of investors said COVID-19 has made them place more importance on ESG considerations.
- Supply chain in focus. The top factor cited among investors reporting being more closely focused on specific ESG factors due to the pandemic was supply chain risk.
- Diversity & inclusion. Respondents increasingly favor board minority diversity targets (44% support vs 28% opposed) and gender diversity targets (49% support, 26% opposed).
- Demand for climate solution investments. Over 80% of survey respondents responded “no” or “not sure” when asked if there are sufficient climate-related investment products available.
Melanie Adams, Vice President and Head of Corporate Governance and Responsible Investment at RBC Global Asset Management, said:
“As we analyze the trends in our year-over-year survey data, we’ve found that a growing majority of institutional investors are convinced of the merits of ESG adoption in their investment approach. A new trend to follow going forward is how the COVID-19 pandemic will influence investors. In this year’s data we are already seeing a greater demand for disclosure on employee health and safety and we expect that the effects of COVID-19 will have implications on investor sentiment for years to come.”
Habib Subjally, Senior Portfolio Manager and Head of Global Equities at RBC Global Asset Management (UK) Limited, said:
“We are seeing investors concerned with a wide range of ESG factors, from anti-corruption to climate change and shareholder rights. By understanding the complexities of these factors on corporate value creation, investors can make better long-term investment decisions. What is notable in the results this year is that a vast majority of institutional investors are interested in how climate-related considerations are factored into their investments. We think this presents an important opportunity for asset managers, financial advisors and consultants to speak with their clients about how climate-related considerations can play a part in their investment goals.”