Sustainability Investing in the UK: An Asset Owners Perspective

Robecco - Sustainability Investing in the UKRequest your hard copy of the report today.
You will be directed to the Robeco website.

In Robeco’s insight report “Sustainability Investing in the UK: An Asset Owners Perspective” we explore the sustainable investing landscape in the UK and the key themes driving its evolution. The report draws upon independent research (conducted by NMG) that examines how leading UK asset owners are integrating sustainable investment principles into their organisation and portfolios.

The analysis is based on insights from 35 in-depth interviews with leading UK institutional investors covering £568bn in assets under management (AUM), representing 26% of the UK institutional market. The respondents included senior sustainability investment professionals, senior investment  professionals (e.g. CIOs) and trustees from some of the country’s leading defined benefit pensions, defined contribution pensions, insurance groups, local government pensions, charities and endowments.

The findings of the study are summarised as five key themes which are currently shaping the industry in the UK today, and are also expected to influence the future.

Theme 1: Environmental issues top the list of sustainability themes

The environment leads the list of sustainability themes for UK institutional investors. Asset managers will need to develop increasingly sophisticated analysis of environmental factors to help institutions incorporate these themes into the investment process.

Theme 2: Integration is the leading sustainability implementation approach

Institutional investors in the UK are engaging in ESG through integrating it into the investment process of their asset managers. Screening tools are applied to a narrow range of ethical issues and managers offer a narrow range of suitable impact investing products.

Theme 3: The UK has one of the strongest cultures of active ownership and engagement

UK institutional investors are some of the world’s most active owners either actively participating in voting or engaging with management. The strong culture of active voting and engagement is supported by a number of major investor collaboration initiatives and proactive organisations, as well as through support offered by voting specialists and managers.

Theme 4: A clear message that asset managers need to raise the bar

Despite high levels of outsourcing, many investors explained that asset managers are still to reach the same level of alignment on these issues as they themselves have. Sustainability specific reporting is a particular issue for asset owners but the offering from asset managers is limited.

Theme 5: A growing focus on cost is a potential challenge to sustainability

The shift towards a defined contribution system in the UK offers opportunities for the growth of sustainable investing principles, but also some critical challenges. A strong emphasis on cost as the primary driver of value has the potential to constrain future growth in sustainability investing but sustainability-weighted factor investing offers a low cost alternative.

To find out more about NMG’s point of view, experience and resources in thought leadership and sustainability investing, please contact Senior Strategy Consultant, Charles Lake.