Increasingly, investors are of the opinion that responsible investments and a positive performance can go hand in hand. Companies that are better prepared for changes in the environment and society are more profitable in the long term, and that is an important factor when investors are deciding which investments to make. Nevertheless, many investors are still experiencing obstacles setting up and implementing responsible investment policies.
17 Oct 2018
Responsible investment survey in collaboration with VBDO
During the summer months we conducted an Environmental, Social and Governance (ESG) survey in collaboration with the Dutch Association of Investors for Sustainable Development (VBDO - Vereniging van Beleggers voor Duurzame Ontwikkeling). The goal of this survey was to investigate the practical implementation of a responsible investment policy among Dutch investors.
79% of the investors surveyed by us indicated that having a responsible or sustainable investment policy was very important. 83% of the participants also indicated that they have a documented responsible investment policy, but there were major differences among the participants about how specific their responsible investment policy was. This is in line with the recent results of the study by VBDO, the Benchmark responsible investment for pension funds. The VBDO study showed that 50% of pension funds have not set long-term sustainability objectives. Only a few pension funds have sustainable objectives that were time-bound and had a vision that extended beyond a few years.
Responsible investment will become increasingly important in the coming years, according to 27% of participants. 66% of the participants thought that responsible investment will become a 'must' (7% were neutral in their answer).
Implementing a responsible investment policy
Most investors implement a responsible investment policy by applying international guidelines, such as the Principles for Responsible Investment (93%), followed by exclusions from certain business activities (such as manufacturers of weapon components or tobacco products) (89%) and exclusion from controversial behaviour (such as the violation of human rights through child labour) (86%). Increasingly, the policy is also used to actively exercise the voting rights (as a shareholder) of stock listed companies (62%).
Obstacles to the implementation of a responsible investment policy
Investors with a responsible investment policy are still not fully satisfied. A large proportion of them have indicated that they will be making their policies more specific over the next two years, wanting to see them better applied and intensifying their monitoring. Nevertheless, a number of investors also experience some obstacles in setting up and implementing their responsible investment policy. The biggest obstacles that emerged were the availability of good and consistent data (41%), not having direct insight into a company’s financial reports (34%) and lack of knowledge on ESG (14%). Rules and regulations concerning responsible investment have yet to be legislated, and this is seen by a number of investors (21%) as a further obstacle.
Responsible investment versus performance
But why wait for regulation? It is crucial that sustainability criteria is integrated into every investment decision. The current climate situation and additional consequences for the Earth are known and worrying. In addition, sustainable investments often also perform well, as recent research has shown that they provide a higher return than conventional investments. A study by asset manager Schroders, shows that excluding non-ESG shares does not cost a substantial part of the exposure. ‘ESG filtering' actually helps to achieve a sustainable return, because the traditional return factors invariably remain intact. Today, there is sufficient evidence that steering for ESG factors is good for reducing risks and therefore ensures a better return/ performance in the long term.
There is no way back
Despite many challenges, responsible investment is increasingly becoming the new reality. If you really want to invest responsibly, you will have to use all the instruments available. It starts with your own investment beliefs as part of the investment policy: first determine how high you want to set the bar.