ESG investment opportunities scarce, say pension professionals

Opportunities for environmental, social and governance (ESG) investment are lacking, according to 29 per cent of pension professionals surveyed in a joint industry report.

The research also found that 21 per cent of trustee chairs and 16 per cent of lay trustees believed ESG investment would detract from returns,

However, no independent trustees or investment officers surveyed agreed that returns would diminish as a result of ESG investments.

More than half (51 per cent) of chairs saw ESG as “just a consideration” and only 20 per cent thought it should be a priority, in contrast to almost three quarters (71 per cent) of investment officers.

“The low return environment is a major concern for UK pension schemes, but opportunities are lacking in the key areas they look to in the hunt for yield, so it is not surprising that ESG is seen just as a consideration,” said the report.

Low returns came in as the primary macro concern of respondents, with 45 per cent having admitted to worries about the issue, overshadowing uncertainty over Brexit, trade wars and the slowdown of the Chinese economy.

Nearly a quarter (23 per cent) of respondents perceived a lack of opportunity in cash flow generating assets, while a dearth of opportunity in infrastructure and real estate was highlighted by 20 per cent.

The report was compiled with insight from the Association of Member Nominated Trustees, the Pensions and Lifetime Savings Association and the Pensions Management Institute, and was led by Mallowstreet.

The joint report added that concerns over the performance of ESG investments illustrated the need to address misconceptions, adding that trustee training could provide a platform for this discussion.

ESG was the second most popular training topic after cybersecurity, with 38 per cent of respondents requesting additional instruction on the issue.

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