A survey of members of the European investment community, including asset managers and private investors, on attitudes to ESG/impact-related topics and the UN Sustainable Development Goals (SDGs), conducted by Berenberg WAM, the Wealth and Asset Management arm of Berenberg private bank, has revealed that the Covid-19 pandemic has increased the significance of the social aspects of ESG for investors.
Among 112 respondents, who were primarily from the UK and Germany, c.47 per cent considered the social ‘S’ element of ESG as the most important, followed by 35 per cent selecting environmental factors (‘E’) and only 18 per cent chose governance (‘G’). Social factors were also thought to have gained the most in importance due to the pandemic, followed by environmental factors.
The reason for this shift has been attributed by participants to the fact that the pandemic has increased scrutiny into how companies – and governments – have dealt with the impact of countries’ lockdown and economic recession on their staff, suppliers, customers and communities. In addition, it was felt Covid-19 had thrown existing inequalities into greater focus, thereby spurring action to address them, as well as highlighted the necessity to think harder about changes to working practices and employee wellbeing in the wake of the pandemic.
When asked to predict what the most relevant ESG product would be for them in five years’ time, actively managed ESG strategies emerged as the favourite for 19 per cent of respondents. This was followed by 17 per cent for impact investments and 15 per cent for Sustainability/SDG-linked bonds. The findings point towards potential wariness of passive vehicles for ESG purposes, where only 6 per cent of respondents chose it as the most relevant product in five years’ time.
On a more contentious note, respondents had decidedly mixed views on using third party impact data providers to measure the ESG impact of their investments. Only 12 per cent found these providers ‘very helpful’, although 47 per cent thought they were ‘somewhat helpful’, and 10 per cent said they were not helpful at all. Some written responses showed investors, while not dismissing third party impact data providers, felt their metrics at times lacked sufficient consistency or access to relevant data.
When asked about their expectations for the 2021 United Nations Climate Change Conference (COP26), scheduled to take place in the UK in early November4, respondents were divided. 41 per cent were generally optimistic about the conference, but 32 per cent said they expected little to no progress.
Richard Brass, Berenberg’s Head of Wealth and Asset Management in the UK, says: “We are seeing a substantive increase of interest by investors across the E, S and G spectrum. The pandemic has resulted in companies, and more broadly governments, being judged on how they treat individuals and employees, especially in areas and sectors hard hit by lockdown measures, and how they adapt for different working practices. Our survey confirms the ongoing focus on the environment and climate change and yet Covid-19 has prompted investors and asset managers to place greater prominence to social issues.
“Investors are recognising the importance of actively managed ESG strategies as a contributor to change. Equally being able to assess use of invested money and funds’ efforts to support ESG factors will only become more important. Sentiment shows that there is more work to do amongst impact data providers to enable transparent and comparable statistics.”