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ESG investors could be missing “plenty of opportunities”

Wind FarmInvestors following the responsible investment trend focus less on returns from social and governance investing than they do on environmental opportunities, a study has found.

Only 15% of professional investors saw the potential in social factors and 40% in governance when it came to generating value from environmental, social and governance (ESG) investing.

Environmental factors were viewed highly with 66% of investors believing environmental investments had the most potential to generate returns, according to the survey by NN Investment Partners.

“Currently environmental issues are high on the political and economic agenda as there is a clear correlation with returns, so it is not necessarily surprising that investors tend to focus more on the ‘E’ of ‘ESG’,” said Adrie Heinsbroek, principal responsible investment at the firm, adding that environmental investments were more quantifiable and easier to report on.

Nearly 90% of investors said that the energy transition away from fossil fuels to renewables has considerable potential to generate investment returns, followed by climate change (81%) and pollution (78%).

However, Heinsbroek added: “But from a portfolio diversification perspective, it is important to also look at social and governance factors as these criteria can also help pinpoint plenty of opportunities.”

There were significant differences between countries too, the study said. French investors’ scores revealed that they have far more balanced views. At 52%, their score for environmental factors was actually lower than for governance (56%). Their social factors score was also much higher than the average.

Nearly 300 professional investors took part in the survey, with respondents being drawn from France, Germany, the Netherlands, Italy, and Belgium, with a further panel of respondents from the UK and Scandinavia.

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