August 10, 2021 | Stamford, CT — As institutional investors incorporate sustainability measures into their investment processes and portfolios, growing numbers are allocating assets to thematic investment strategies that seek to make an impact on a specific issue, like improving the environment or fighting climate change. 

In 2016, about half of asset owners participating in an ongoing Coalition Greenwich study had incorporated some element of sustainability into their investment processes. Five years later, that share is closer to three-quarters (72%). Looking ahead, nearly eight out of 10 institutions expect to have adopted sustainability criteria into investment decision-making processes by 2026.

“Institutions are increasingly looking for their portfolios to have a positive impact on the environment or the community while either matching or outperforming benchmarks and generating additional benefits such as portfolio diversification or enhanced risk management,” says Davis Walmsley, Head of Client Relationships at Coalition Greenwich and author of Targeting Impact: Integrated ESG and the Role of Thematic Strategies in Asset-Owner Portfolios. “Institutions are increasing allocations to sustainable thematic investment strategies because many asset owners believe they can generate greater impact than ESG integration approaches while acting as a source of alpha by identifying investment trends earlier than other approaches.”

To achieve those goals, growing numbers of institutional investors are turning to sustainable thematic investment strategies. These strategies focus on one or more areas where social or environmental need is spawning commercial growth opportunities, creating the potential for both attractive investment returns and positive impact. Approximately two thirds of institutional investors participating in a new Coalition Greenwich study report they have increased their use of these strategies in the past three years. 

“With our three-decade track record in sustainable investing, it was important for us to partner with Coalition Greenwich to hear directly from institutional investors about their evolving opinions and attitudes toward the range of approaches,” said Karrie Van Belle, Chief Marketing and Innovation Officer, AGF Investments Inc. “It’s encouraging to learn that institutions are increasingly seeking thematic strategies, such as the ones we offer, in recognition they can provide both positive alpha and impact.”

Targeting Impact: Integrated ESG and the Role of Thematic Strategies in Asset-Owner Portfolios presents the evolution of ESG thinking among institutional investors and outlines the role of thematic strategies for investors seeking to increase the impact of their portfolios beyond performance.