News | ESG


Investors plan Sustainable Development Goal integration to implement ESG into their portfolios


Investors with allocations to alternative assets must turn talk into action if they want to help solve some of the world’s biggest environmental and social prob- lems, a survey has discovered.


The overwhelming majority (91%) of investors owning non-traditional institu- tional assets, such as property, infrastructure and private equity, believe that integrating the UN’s Sustainable Development Goals (SDGs) into investment decisions could help improve access to education, fresh water and cleaner energy sources.


This was the headline of ESG to SDGs: The Road Ahead survey. Once all of the replies had been analysed the researchers found most respondents (89%) believe that incorporating the goals into their portfolios could push risk-adjusted returns higher. Yet only a quarter of the more than 200 pension schemes and insurers ques- tioned by alternative investment specialist LGT Capital Partners for the report integrate SDGs into their portfolios. A further 40% intend to consider some of the goals when assessing companies within the next two years.


Impact investing on the rise as asset owners seek to make a difference


Investors’ appetite to use their capital to make a differ- ence is high with 94% planning to increase their allo- cation to impact investments in the next three years, according to a new poll.


Of the asset owners questioned by KBI Global Inves- tors, 78% already have investments in their portfolios that aim to make a profit while benefiting society or the planet.


Of those already invested in this sector, 21% held such investments through the public markets, while the same percentage was in the private assets. Appetite is strong here with seven in 10 of those ques- tioned saying that they would welcome further educa- tion and training on the topic.


The biggest barrier to asset owners increasing the size of their impact portfolios is accessing fresh opportuni- ties, according to 59% of those surveyed. Cost came second at 21%, just ahead of liquidity at 20%. However, alongside improving access, KBI’s head of responsible investing, Eoin Fahy, called on the impact community to do more to make measuring the perfor- mance of such investments easier.


Losses to increase as organisations are unprepared for cyber attacks


It appears that this change in thinking towards the SDGs is the result of how sustainability is now viewed by many investors. Investment policies have switched from managing risk to driving growth and so the UN’s goals have been identified as a way to measure outcomes. For example, goals 7 (Affordable and Clean Energy) and 13 (Climate Action) are most commonly used by investors when integrating ESG into their portfolios, according to LGT.


Other areas of interest identified by the survey include investors wanting best practice standards and a broader range of data sources to aid the further inte- gration of ESG into investment decision-making. LGT managing partner and UN PRI board member Tycho Sneyers said: “91% of investors believe the SDGs will help the financial industry to address press- ing environmental and social issues. As such, investors are increasingly turn- ing to the SDGs to make their ESG and sustainable investment activities more outcome-oriented.


“The SDGs broaden the ESG scope from risk management to value creation in financial, natural and social capital,” he added.


There has been a 330% rise in financial loses linked to cyber attacks in the past year and the majority of organ- isations are unprepared to stop future events from eroding their revenues further, insurer Hiscox reports. Companies and organisations with between 250 and 999 employees have lost £551,000 on average, up from £128,000 a year ago.


The frequency of such events has also increased over the past year with 61% of public and private organisa- tions in the US, the UK, Belgium, Germany, France, Spain and the Netherlands reporting at least one such incident. This compares to 45% a year ago, a jump of 35%.


These figures make it clear that organisations need to beef up their security, yet Hiscox has rated only 10% of the 5,400 organisations it examined for its Cyber Read- iness report as capable of defending themselves against such incidents. Worryingly, it has ranked three-quarters (74%) of the organisations that it looked at as unprepared “novices”.


Issue 84 | May–June 2019 | portfolio institutional | 23


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