Portfolios that integrate environmental, social and governance factors are likely to perform as well or better than non-ESG investments, say 90% of institutional investors.
Investment performance has long been a primary concern of institutional investors considering the adoption of ESG principles. In last year’s survey, more than 80% of consultants said clients asked whether ESG would hurt investment returns, by far the most common client question they reported.
Those worries appear to be subsiding. When asked how they believe an ESG-integrated portfolio is likely to perform relative to a non ESG integrated portfolio, nearly a third (31%) of investor respondents in this year’s survey said the former would perform better. (Last year, only 18% reported that viewpoint.) And on the flipside, the proportion of investors who believe an ESG-integrated portfolio is likely to underperform dropped from 17% last year to 10% this year. A key signal of acceptance is the 59% of respondents who believe the two portfolios would generate equal performance; that response rate narrowed from 64% in 2017, as more investors migrate to the belief that ESG integration will produce tangible investment benefits.
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