Executive Summary

Institutional Investors in Continental Europe are focused on three main topics – managing their portfolios amid the “lower for longer” interest rate environment, the practicalities of implementing ESG criteria into their portfolios and increased hiring amid repricing of several asset classes in the wake of the COVID crisis Low interest rates have been a major challenge for European institutional investors for over a decade but unprecedented central bank easing in the wake of the COVID crisis has further added to the urgency of adjusting portfolios in order to meet return targets. This is reinforcing demand for risk assets which is further aided by the re-pricing of several asset classes amid the broad market draw down in March/ April 2020. Equities, specialist fixed income and real assets are likely to be the main beneficiaries of this trend. Rather than slowing the trend towards ESG investing, the COVID crisis appears to have accelerated it. One out of four institutions is actively working on projects to better incorporate ESG criteria into their investment approach – in addition to those that have already done so. Three quarters of investors now take ESG criteria into account in their manager selection – up from half two years ago – and half of all investors now track the carbon footprint of their portfolio or plan to do so in 24 months.

Methodology

During the first half of 2020, Greenwich Associates conducted in-depth interviews with 538 key decision-makers at the largest continental European institutional investors.