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2019 Global Perspectives on Responsible Investing
Climate change, socioeconomic inequality, cybersecurity, and other emerging global trends create risks and opportunities for investors. Understanding and managing these and other factors will be key to investment success in the future. Aon’s 2019 Global Perspectives on Responsible Investing uncovers how responsible investing techniques are evolving to help mitigate these risks, and what organizations need to know to maximize performance and minimize volatility.
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Growth of Responsible Investing
The number of respondents who indicated that responsible investing was at least somewhat important increased by 17 percentage points since 2018. Many respondents indicated that this growing trend in implementing responsible investing strategies is a result of regulations.
Respondents who indicated that responsible investing was at least somewhat important to their organization
2018
2019
68
85
%
%
Positive sentiment toward responsible investing increased across Canada, Continental Europe, United Kingdom, and the United States.
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Continental Europe: +5%, percent very important held steady
UK: +21% at least somewhat important, +19% very important
US: +21% at least somewhat important, -3 very important
Canada: +10% at least somewhat important, +5 very important
Responsible Investing by Type of Investment
Investors overwhelmingly favor the integration of environmental, social, and governance (ESG) factors into investment decisions over other types of responsible investing.
Hover to explore how Aon defines responsible investing and where respondents allocated their assets.
ESG
Socially Responsible Investing
Impact Investing
Mission Related Investing
ESG
50%
ESG investment decisions continue to be directed by the fundamentals of an investment in conjunction with non-financial environmental, social and governance factors that may have a material impact on the investment’s future financial performance. ESG factors represent risks that can and should be monitored, as well as opportunities for outperformance.
25%
Socially responsible investing involves the avoidance of or divestment from an investment or group of investments, usually based on an investor’s or organization’s value system.
Socially Responsible Investing
12%
Impact investing is generally aligned with an individual or organization’s values. Often referred to as “doing good and doing well,” the goal of impact investing is to generate returns while having a positive impact.
Impact Investing
4%
Examples may include faith-based investing, investing to extend a foundation’s grant making capabilities, etc.
Mission Related Investing
Application Within Portfolios
What were the key drivers for institutions that implement a responsible investment program?
2018
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2019
We wish to impact certain global issues. For example, climate change, diversity, and/or social justice
We do not consider responsible investing as investment criteria
We believe the returns of responsible investments will outpace traditional investing
We believe that the incorporation of non-financial (ESG) data results in better investments
in 2019
from 2018
42%
+3%
29%
in 2019
+3%
from 2018
21%
in 2019
-3%
from 2018
15%
in 2019
-11%
from 2018
Regulation Plays an Increasing Role
This year, regulation emerged as a key driver for responsible investing.
In the UK, where many of the latest regulatory changes have been focused, 57% of respondents indicated regulations were a motivating factor. In the U.S. and Canada, where the regulatory response has been slower, only 17% and 8% of respondents, respectively, indicated regulations were motivating their responsible investing initiatives.
How do Regulations Impact Responsible Investments?
27%
31%
6%
18%
18%
18%
We are waiting to see what regulations may be enacted before we move forward with implementing responsible investment strategies
18%
We anticipate that the regulator in our jurisdiction will be enacting responsible investment regulations in the future, and we are therefore proactively implementing strategies in anticipation of this
6%
Regulations in our jurisdiction are not currently compatible with responsible investment strategies and we have avoided implementation as a result
27%
Other
31%
We are implementing responsible investment strategies to comply with local regulations on climate change, ESG, or other responsible investment issues
Responsible Investment Manager Selection
There are many factors to consider when beginning the process of manager selection.
Nearly half of those polled indicated that responsible investing is a factor.
We consider responsible investment as one of a number of factors when making fund manager selections
44%
30%
29%
14%
9%
We would not withdraw from a manager solely on the basis of responsible investment factors
Responsible investment does not impact fund selection at this time
We use responsible investment factors as a tie-breaker for investment decision-making
We would withdraw from a manager that was outperforming if they had no responsible investment policy in place
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“At Aon, we have a growing number of initiatives devoted to improving and expanding our commitment to and action around sustainability.”
– Steve Cummings, Global Investment Officer
“Institutional investors are increasingly interested in identifying and mitigating environmental, social, and governance risk factors in their portfolios, as well as positively impacting people and the planet.”
– Meredith Jones, Partner, Global Head of Responsible Investing
“The greatest increase in positive sentiment came from the UK. In just one year, investors who said that responsible investing is ‘very important’ rose to 42% from 19%. This mirrors our conversations with clients.”
– Tim Manuel, UK Head of Responsible Investment
What Keeps Investors Up at Night?
Institutional investors remain concerned about a variety of global problems. The first three concerns ranked the same as the 2018 survey with water scarcity dropping in concern and biodiversity and/or ecosystem breakdown moving up.
Climate change and/or natural disasters
Nationalism/
protectionism
Socioeconomic inequality
Biodiversity and/or ecosystem breakdown
Water scarcity
67%
50%
38%
36%
34%
Future of Institutional Responsible Investments
Role of Responsible Investments Going Forward
How Investors Will View Responsible Investment in the Future
A third of investors now believe that responsible investing is nearing a tipping point. Those who think responsible investing will be used only in a limited fashion (or will decrease) declined year over year
Role of Responsible Investments Going Forward
Increase allocation
Evaluate responsible investing for possible inclusion in the portfolio
Maintain current allocation
We will not be actively pursuing responsible investment allocations
Significantly increase allocation
Decrease allocation
Significantly decrease allocation
0%
5%
10%
15%
20%
25%
30%
35%
2019
2019
2018
Yes, we are nearing a tipping point
Yes, but in a limited fashion
Yes, but mostly those that have specific values, missions or goals
The use of non-financial ESG data will become ubiquitous and won’t be distinguishable from mainstream investments
The current level of responsible investment will remain stable, but won’t increase
Interest in responsible investing will decrease
0%
5%
10%
15%
20%
25%
30%
35%
How Investors Will View Responsible Investment in the Future
Whether you are just beginning to investigate the topic or are looking to significantly grow your responsible investing efforts, Aon has a wealth of research, educational materials, ESG ratings on buy-rated managers, climate change scenarios, and other insights.
How Aon Can Help
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@2019Aon plc. All rights reserved.
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Given the upswing in sentiment across geographies and investor types, the future of responsible investing seems bright. When asked about the role of responsible investments moving forward, most respondents indicated they would maintain or increase allocation.
44%
30%
29%
14%
9%
Survey Methodology
Please refer to the Global Perspectives on Responsible Investing report for more detailed information related to survey results.