Interest in Responsible Investing Among Institutional Investors Continues to Grow
Calum Mackenzie, Partner, Investment Consulting, Aon in Canada
A recent Aon’s survey of 223 institutional investors around the world found that 68 percent consider responsible investing to be important to their organization to some degree. Forty percent have already developed a Responsible Investment (“RI”) policy for use in making investment decisions, and another 14 percent are in the process of developing a policy.
Of those that have implemented an RI initiative within their organizations around the world, the most popular reasons were:
- A belief that the incorporation of non-financial Environmental, Social and Governance (ESG) data resulted in better investment decisions (39 percent)
- A desire to impact certain global issues, such as the carbon footprint, climate change and water issues (26 percent)
Attitudes towards RI in Canada
Aon’s survey found there is a geographic split when it comes to attitudes towards RI, with noticeably more activity in the EU, and particularly the UK, than in the US. Canada, meanwhile, falls in between – less engaged in RI than the UK and EU, but substantively more active than the US.
For example, 80 percent of investors in the UK say that climate change is the major RI-related investment concern, followed by 76 percent of those in the EU and 67 percent of Canadian investors; in the US, climate change ranked second among investment concerns, cited by only 48 percent of respondents, and behind concerns over economic nationalism (56 percent). Similarly, in the US no investors said that they would withdraw from a fund manager who lacked an RI policy; five percent of Canadian respondents, and 11 percent of UK investors, said they would do so.
RI is one of the most talked-about subjects among institutional investors in Canada, particularly endowments, foundations and others with a public interest mission, but we’re seeing more engagement among large corporate investors as well. Institutions are increasingly realizing the link between well-governed companies and better investment performance, and the spectrum of action ranges from increased monitoring of ESG to a more active approach to proxy voting and dedicated ESG-focused investment mandates.
The Canadian institutional focus on RI extends to investment managers as well. Anecdotally, we see investment committees spending more time dedicated to ESG discussions, and they are questioning managers vigorously about their ESG policies. That speaks to how important the issue has become to institutions, and it’s one reason we now incorporate an ESG rating into our manager evaluation process.