EY’s 2021 Global Institutional Investor Survey reveals that a burgeoning number of institutional investors around the world are placing greater emphasis on ESG performance in their decision-making, with 74 per cent now more likely to divest from companies with poor ESG track records.
However, concrete action is still lacking, and there is an urgent need for better quality disclosure from companies, the firm says.
The report, now in its sixth year, canvasses the views of 320 institutional investors across 19 countries. It shows that 90 per cent of investors say they now attach greater importance to ESG performance in their decision-making than they did before the COVID-19 pandemic; and that 92 per cent say they have made decisions over the past 12 months based on the potential benefits of a “green recovery”.
There are also clear intentions among the majority of investors, to look more closely at ESG risks across their portfolios and investment targets in the future. More than three-quarters (77 per cent) of those surveyed say that, over the next two years, they plan to step-up their analysis of “physical” risks – the impact of climate change on a business’ ability to provide its products and services. This is an increase from 73 per cent in 2020. Similarly, 80 per cent will be doing more to evaluate “transition” risks – which are the market impacts that might result from the move to a low carbon economy – up from 71 per cent in 2020.
Our In My Opinion this week finds Bill Nixon, Managing Partner at Maven Capital Partners urging investors to reconsider Venture Capital Trusts. “With GDP rising again in the second quarter of 2021, this time by 4.8 per cent, the economic recovery is gathering pace and investor optimism remains strong. The type of high growth, early-stage businesses that VCTs back, many with disruptive business models and pioneering products and services, should do well against such a backdrop. Certainly, the robust post-pandemic performance of the UK’s biotech and life sciences sectors supports the notion that early-stage companies born of economic crises can be among the best businesses to back,” Nixon writes.
Beverly Chandler, Managing Editor, Wealth Adviser