Social investments set to increase for asset owners

Nearly half, 49%, of asset owners currently invest in social investments or plan to do so in the next two years according to ‘Think EQuilibrium – Climate of change: 2022 Global institutional investor study’, by fund manager nuveen.

Nearly two-thirds, 64%, of investors also believe they need to completely rethink how they approach portfolio construction strategies. The survey by nuveen, a TIAA company, found that asset owners and consultants are reexamining traditional approaches due to increased volatility, rising inflation, tightening monetary policy, ongoing disruptions from Covid-19 and increased awareness of social inequality.

“This year’s survey results confirm what has been a palpable sense across the asset management industry: momentum has never been stronger for addressing climate change and confronting the risks and opportunities related to the transition to a low carbon economy,” added nuveen.

Nearly all respondents, 86%, think the transition to a low carbon economy will present new opportunities and nearly three quarters, 71%, believe that climate risk is investment risk. In addition more than half, 52%, agree that investors can impact social inequality through investment choices.

As a result, 49% of asset owners currently invest in social investments or plan to do so in the next two years. The institutions are exploring a vast array of opportunities, including community infrastructure projects; fintech innovations addressing financial inclusion; diversity, equality and inclusion-focused investments (DE&I); and affordable housing (see graph).

DE&I metrics are also increasingly influencing fund manager selection processes. One third, 35%, of investors said DE&I is a consideration in their selection process; 15% consider DE&I as a tie-breaker while 5% of investors said that a manager’s inability to measure DE&I progress is a deal-breaker.

A public pension CIO in Australia said in the report: “When you talk about diversity, you have to be very careful that you get true diversity, not just what percentage of women are in the fund manager’s workforce. … Diversity of thought leads to better decision-making.”

Nuveen interviewed 800 global institutional investors and consultants, who all represent funds with a minimum of $500m in assets.

©Markets Media Europe 2022

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