September 28, 2023 | Stamford, CT — Institutional investors in North America and Europe with more than a decade of experience in ESG investing are beginning to coalesce around an emerging set of best practices that push sustainable investing into a new and more mature phase, according to new research from Coalition Greenwich commissioned by AGF Investments Inc.
In a remarkably short period of time, sustainable investing has evolved from a tool employed by a handful of activist institutions to standard operating procedure across the entire universe of institutional investors. Nine out of 10 institutional investors participating in a recent study from Coalition Greenwich expect to be investing sustainably or working toward the goal of introducing sustainable investment practices into their portfolios within the next five years. Endowments and foundations are at the vanguard of this movement, integrating sustainability into both traditional and alternative asset classes.
“As sustainable investing gains widespread acceptance, certain common trends and best practices are beginning to emerge that could help make it easier for investors of all types to confidently adopt sustainable investment strategies,” says Todd Glickson, Head of Investment Management – North America at Coalition Greenwich and author of Emerging Trends in Sustainable Investing.
The most important trends and best practices identified include:
- Full integration: Today, most institutions are moving beyond discrete allocations and are holistically integrating sustainability into their investment processes, across portfolios and asset classes.
- Heightened Expectations: A process of full integration is taking place amid a critical shift in expectations and asset owners expect returns from their sustainable investments to match or exceed asset class benchmarks.
- Guarding Against Greenwashing: Greenwashing is acknowledged as a real concern, and investors are taking proactive steps to guard against it.
- Enhancing Impact and Returns: Even as investors move to integrate sustainability fully into their portfolios, they continue to employ thematic strategies that allow them to concentrate assets in order to enhance environmental and social impact, as well as investment returns.
Despite the rapid evolution of sustainable investing, the industry still faces some real headwinds to further growth. Chief among those headwinds is a lack of consensus on how to measure the impact of sustainable investments and continued uncertainty about regulation.
“As institutions continue to hone best practices, the industry and global regulators must come together to create a solid and reliable framework to support the continued growth and evolution of sustainable investing,” says Todd Glickson.
Emerging Trends in Sustainable Investing traces the evolution of sustainable investing, examines current trends in adoption, usage and implementation, identifies the most important factors, best practices, and obstacles influencing the further development of sustainable investing.