Nine out of ten global institutional investors actively consider ESG factors when it comes to real assets investment, a new study from Aviva Investors has found.
The study surveyed 500 institutional investors from the UK, Europe, North America, and the Asia Pacific region with assets under management worth US$3.5 trillion (£2.83 trillion) to better understand key investment decision makers.
According to the results, attitudes toward ESG and sustainable investment have been the “biggest structural trend in the investment industry in recent years”. This trend has extended to the ‘real assets’ arena, real estate, energy, and infrastructure.
ESG is now considered an important factor in investment decisions involving real assets by 93% of institutions, and for 17% sustainability is a critical factor.
However, there is a clear regional variation behind this headline. Around one-third of the institutional investor community in Europe (35%) and Asia (31%) mainly employs real assets for their positive ESG outcomes, compared to just 10% for North American investors.
“As well as getting their insights on asset allocation, risks, opportunities and preferred routes to market, this year’s survey features a deep dive into attitudes towards sustainable real assets” said Daniel McHug, chief investment officer at Aviva Investors Real Assets. “This covers everything from net zero targets to whether investors see a trade-off between achieving ESG impact and financial returns. The results throw up clear regional disparities”.
Key motivations for institutions drawn to sustainable real assets include alignment with corporate values (60%), risk management (58%), and evidence of improved financial performance from investing sustainably (54%).
Meanwhile, greenwashing represented the biggest material risk to investment in sustainable real assets, with over half (52%) of investors raising concerns. High valuations and difficulty in measuring positive impacts completed the trio of top-ranked risks at 44% and 43% respectively.
While sustainable investing has shown an upward trend, diversification remains the number one driver for investing in real assets. However, the proportion of institutional investors citing diversification as their primary reason for allocating to the asset class has dropped, from 64% three years ago to 57% today.
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