Survey: ESG Investing On The Rise
November 13, 2018 NPT Staff
One in eight organizations does not currently invest in sustainable investing strategies but plans to begin in 2019, according to a recent survey.
The SEI Nonprofit Management Research Panel polled 105 organizations in October, including 75 that were nonprofits, and 30 others representing corporate, union or government retirement plans as part of the Institutional Investors Sustainable Investing Survey 2018.
Half of those surveyed do not currently invest in environmental, social and governance (ESG) strategies compared with 38 percent that do and the 12 percent that plan to begin in 2019. Concerns about performance (60 percent) and the difficulty in evaluating investment products and strategies (53 percent) were the most common issues cited in preventing organizations from pursuing sustainable investments. Other factors were less common, including:
- Risk measurement and management difficulties, 32 percent;
- Difficulty in benchmarking strategies, 30 percent;
- Other investments are higher priorities, 26 percent;
- Concerns about lack of transparency and reported data, 21 percent;
- Cannot gain committee agreement, 18 percent;
- Deviation from investment policy statement (IPS), 18 percent; and,
- Costs and fees, 12 percent.
Over the next three years, 52 percent of respondents said they plan to increase the overall percentage invested in sustainable investing while 48 percent plan to maintain the current allocation. No respondents said they plan to decrease the overall percentage invested.
Of those surveyed, half were either private foundations (30 percent) or educational institutions (20 percent), followed by community foundations (18 percent). Twenty percent were classified as other while 6 percent each identified as faith-based or health and human services nonprofits.
Once the decision was made to invest this way, 33 percent of respondents said it took more than a year to implement while 29 percent said it took less than three months. Some 17 percent said it took more than two years compared with 13 percent that said it took six to 12 months and another 8 percent that said it took three to six months.
Aligning with overall mission (69 percent) was by far the most popular factor in driving organizations to consider or invest in sustainable investments, followed by:
- Social impact, 49 percent;
- Reputation, 39 percent;
- Financial return 36 percent;
- Increased access to broader range of products/solutions, 34 percent;
- Investment committee prioritized it, 24 percent;
- Investment policy requires it, 22 percent; and,
- Donor demand, 12 percent.
Renewable energy (58 percent) and energy efficiency (58 percent) were the most popular themes within impact investing that interested organizations, followed by affordable housing (43 percent), water (43 percent), health (40 percent), green buildings (38 percent), and education (38 percent).
Including sustainable investing strategies as criteria in the investment policy statement (47 percent) was the most common way to implement or plan such strategies followed by using impact investing to invest directly in companies or organizations that support mission (43 percent); using a negative screen to limit holding certain securities (40 percent), and using a positive screen to add or overweight securities with higher ESG rankings (38 percent).
The 105 respondents had investable assets ranging from $20 million to $5 billion but none were current clients of the investment services firm. SEI works with clients in industries ranging from the nonprofit sector to financial institutions. The organization currently oversees $920 billion in investments, including hedge funds and mutual funds.