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Alternative Market Briefing

Socially responsible investing goes mainstream as pandemic continues, says survey

Wednesday, September 23, 2020

Laxman Pai, Opalesque Asia:

About two-thirds of investors agree that the global pandemic has led them to place a higher priority on social factors when analyzing investment risk, according to a survey of attitudes toward ESG investing by Federated Hermes. The Pittsburgh-based international investment firm has $629bn in AUM.

According to the 2020 ESG Investing Survey, the growing importance of environmental, social, and governance considerations as investors are scrutinizing social factors as the Covid-19 pandemic put a spotlight on topics such as public health, pay equity and working conditions.

Besides, 46% of investors believe that good governance is very important, while 88% consider environmental factors in their investment decisions.

"As the pandemic endures, a majority of institutions, financial advisors and high-net-worth individuals are focusing on fundamental ESG risks and opportunities, which have evolved into the mainstream," Mary Green, client portfolio manager, said in a prepared statement. "Our survey showed the importance of responsible investing credentials among investors."

As part of the study, 90% of financial advisors reported that they had clients asking about ESG. The majority of financial advisors considered responsible investing when making recommendations to their clients, indicating that ESG risk evaluation is becoming a key part of investment programs.

The survey further found that investors are becoming more sophisticated about ESG investing. Investors are moving away from negative screening strategies that exclude certain investments. Instead, 64% of high-net-worth investors and 74% of institutions focus on positive screening strategies, which is the inclusion of certain investments based on ESG data.

Institutional investors (64%) lead the way in understanding the value of long-term engagement with portfolio investments, and 48% of institutional survey respondents said active strategies are their primary way of finding ESG investments.

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