Trustees warn lack of member appetite for ESG investing is hindering progress

More than half (53 per cent) of professional defined benefit (DB) pension trustees have cited the lack of member appetite for environmental, social and governance (ESG) investing as a factor hindering the growth of sustainable investing.

The study, conducted by Charles Stanley Fiduciary Management, found that 35 per cent felt a lack of understanding about the options available as a hindrance, while the suspicion that ESG investing was just a fad, fears that it could harm returns, and underwhelming investment vehicles, were cited as factors by 31 per cent of respondents.

Meanwhile, just 2 per cent felt that a preference for activist investing was hindering progress, while 18 per cent cited the lack of a clear ESG framework, and regulatory uncertainty.

Despite these factors, almost three-quarters (73 per cent) of professional DB trustees said they had an increased appetite for sustainable investing, while 51 per cent felt ESG should be mandated by regulation.

However, 44 per cent believed that whilst ESG will improve performance, it will not save the planet.

Nearly three-quarters (71 per cent) said that they believed investment costs were more important than the expectation of future returns.

“The increase in focus on ESG investing has been dramatic over the last 18 months – and not before time,” commented Charles Stanley Fiduciary Management senior portfolio manager, Bob Campion.

“Trustees have welcomed this shift in attention wholeheartedly, encouraged by regulators and governments.

“They recognise that as long-term investors the sustainability of the businesses their funds support is linked inextricably to the security of their members’ retirement income.

“But what this research suggests is that while ESG investing is now seen by trustees as a fundamental aspect of a long-term strategy, only a minority expect it to translate into real climate change improvements or other ESG goals.

“Trustees clearly lack faith in their ability to influence corporate behaviour. Fund managers must work harder to demonstrate that their increased resourcing and activity - particularly regarding voting and engagement - has a positive impact on the world.”

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