Global investors to fully adopt green investments by 2030 as trend gathers pace, finds survey

Green investment is set to take off in the next three years and will become integral to institutional investors’ approach by 2030, according to a report by Allianz Global Investors (AllianzGI) released on Wednesday.

Green investment strategy, also known as environmental, social and governance (ESG) approach, refers to financial investments that can help reduce pollution and have a positive impact on society.

More than 70 per cent of the 490 institutional investors managing US$15 trillion worth of investments involved in the survey, said they will make sure their portfolio involves green and other social impact concepts by the end of the next decade, up from only 1 per cent now.

AllianzGI has €145 billion (US$163 billion) worth of ESG in its portfolio, representing 28.8 per cent or €505 billion of total assets under management in 2018.

“ESG is in our DNA, Allianz Global Investors always believe ESG factors are important investment performance drivers, both from a return and risk perspective,” said Desmond Ng, head of Asia-Pacific of AllianzGI.

“We are committed to integrating ESG factors into all investment decisions and across all asset classes. We pursue an active stewardship approach to improve business practices and performance of companies.”

More than two-thirds of the asset managers believe green investment concepts will have a positive impact on corporate behaviour and governance, while less than 20 per cent feel ESG investing will sacrifice investment returns.

US institutional investors were the strongest advocates of green investment, with 80 per cent expecting the approach to become much more widespread over the next three years.

This was followed by 63 per cent of Asia-Pacific investors, followed by the UK and Japan at 58 per cent and 54 per cent, respectively.

A separate survey by French lender BNP Paribas released on Tuesday showed Asia-Pacific institutional investors allocated 15 per cent of funds to ESG investment, falling short of the 18 per cent global level.

Asia-Pacific investors, however, were more optimistic about the future, with over half saying that they would allocate up to 75 per cent of their funds towards ESG by 2021, compared with 49 per cent globally.

The BNP survey was conducted on 347 global institutional investors who have US$23 trillion in assets under management.

The green investment trend has opened up new job opportunities. Some 50 per cent of Asia-Pacific institutional investors plan to hire external ESG specialists, while 34 per cent globally expect to do so.

“While Asia’s optimism in terms of asset allocation to ESG may not come as a surprise as multiple Asian markets, not least China, have pushed for increased regulation surrounding ESG disclosures, challenges such as transforming disparate data sets into actionable insights and technology costs hinder progress,” said Madhu Gayer, investment analytics an sustainability manager of BNP Paribas Securities Services in a statement.

Another study from Bank of America Merrill Lynch released on Wednesday showed that share prices of US companies with strong ESG track record and Asian companies with good corporate governance outperformed their peers.

Bank of America Merrill Lynch backtested a range of MSCI Asian companies to check on their ESG practices over the last 10 years and their financial performance.

It found banks with more gender diversity and investment in human capital had 2 to 5 per cent higher return on equity and up to 6 per cent lower volatility in their share price than poor ESG performers.

In the consumer sector, food and beverage firms that had initiated policies to cut down packaging waste had a 5 per cent higher return on equity and up to 5 per cent lower share price volatility.