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Investors increasingly turning to ESG, report finds

ESGEnvironmental, social and governance (ESG) strategies are becoming increasingly popular among all types of investors, from individual to institutions, a report has found.

Six out of ten professional investors recognise there are gains to be made through ESG investing, while nearly two thirds of institutional investors say that ESG will become the industry standard within the next five years, according to the survey by Natixis Investment Managers (Natixis IM).

Institutions already incorporate a wide range of ESG strategies in their portfolios. Over 60% of fund buyers say ESG is part of their investment practices, while more than 50% plan to increase allocations through the course of this year.

Reporting and measurement are still the main obstacles for professional investors when it comes to ESG. More than two thirds of financial professionals say they would be “more likely to recommend products if there was better data and reporting available”.

“ESG-related investment strategies are now recognised beyond the narrow scope of negative screening with which it was once associated,” said Natixis IM chief executive Jean Raby.

“Demand for ESG-related strategies is outpacing supply. As it continues to expand into a broader set of investment processes, investors will increasingly require greater clarity and definition.”

As ESG grows in popularity, the investment industry will come under more pressure. While investors “face greater reporting requirements of their own, they will increasingly come to lean on the investment industry to provide the measurement and reporting they need”, said Andrew Benton, head of Northern Europe at Natixis IM.

Younger generations are leading the way in ESG belief amongst individual investors. Only 41% of baby boomers, and 30% of the silent generation believe their investments can make a positive impact on the world, whereas 56% of millennials and half of generation X investors think where they put their money matters.

Overall, seven out of ten individual investors say it is important to make a positive impact through their investments, according to the report.

Across all investor groups surveyed, there is a consensus of the importance to align investments with values. Four in five individual investors, two thirds of institutional investors, and over half of professional fund buyers seek to invest in accordance with their values.

The survey involved over 13,000 respondents across different investor groups worldwide, and was carried out by CoreData Research for Natixis IM.

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