A new study by Schroders has identified an increase in performance concerns about sustainable investing among Australian institutional investors.
Around 64% of Australian investors surveyed cited performance issues as a challenge, up from 49% a year earlier and above the level of concern seen globally (53%).
Other top challenges for local investors include greenwashing (53%), difficulty measuring and managing risk (50%), cost (50%), lack of transparency and reported data (39% ), and lack of consistency in disclosures/reporting frameworks (39%).
Meanwhile, 57% of investors in Australia and 59% of investors globally suggested that tangible evidence of real results was the most important element of an active ownership strategy.
Governance and oversight was rated as one of the most important topics when engaging with companies by 80% of local investors and 64% of those globally.
Australian investors named human rights (77%) the second most important engagement priority, followed by climate (73%). Additionally, 41% were found to have made a commitment to net zero, slightly higher than the rate seen globally (37%).
“Findings from this year’s study demonstrate that institutional investors are increasingly interested in measuring, managing and delivering impact,” commented Stephanie Hukins, Director of Sustainability Investments at Schroders, Australia.
“While integrating ESG into the investment process is the preferred approach to implementing sustainable investing, impact investing saw the most dramatic increase over the year, from 27 % of investors at 48%.
Schroders’ study also revealed a shift in motivation to embrace sustainable investments in Australia.
“Interestingly, while regulatory and industry pressure remain a significant influence on Australian institutional investors, the desire to better align portfolios with company values and, at the same time, positively impact society and the planet, has become the top two reasons driving sustainable investing this year,” Ms. Hukins explained.
When it comes to what would encourage them to increase their sustainable investments, three-quarters of local investors said new investment opportunities that address the energy transition were their top preference, compared to 59% globally.
The other biggest potential drivers in Australia were more quantitative evidence on the financial considerations of sustainable investing (58%), greater clarity around the different sustainable options available (48%) and industry initiatives ( 44%).
Jon Bragg is a reporter for Investor Daily from Momentum Media, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.