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Alternative Market Briefing

Climate risk rockets up agenda for European Institutional investors: Mercer

Thursday, August 27, 2020

Laxman Pai, Opalesque Asia:

An overwhelming majority (89%) of European institutional investors, including pension schemes, surveyed now consider wider environmental, social and governance (ESG) risks as part of their investment decisions, up from 55% in 2019.

According to Mercer's latest European Asset allocation insights, with 54% of those surveyed now actively considering the impact of such risks in their investment allocations, compared to just 14% in 2019.

While regulation continues to drive investors' concern with ESG risk (85%), Mercer's research shows that a growing number are driven by the potential impact on investment returns (51%, up from 29%). Forty percent of schemes also cited the desire to mitigate potential reputational damage as a reason to consider ESG risks, and 30% noted the wish to align with the sponsoring company's existing corporate responsibility strategies.

Mercer surveyed 927 institutional investor clients with total assets of about €1.1 trillion ($1.3 trillion). Respondents were surveyed in the fourth quarter and early in the first quarter.

More generally, Mercer's 2020 research shows that investors across Europe and the UK continue to diversify away from equity exposure. Investors are instead aiming to diversify their portfolios and protect against market volatility by increasing allocations to growth fixed income (10% increase), real assets (4% increase), and private equity (6% increase).

Although some investors are disin......................

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