Climate change remains the biggest environmental consideration affecting investment decisions, a new report from Deutsche Bank argues.
According to the group’s 2023 ESG Survey, more than two-fifths (44%) of respondents saw it as the most-important factor, followed by 20% naming land degradation, 15% ocean pollution and the unsustainable use of marine resources, and 12% naming biodiversity loss.
Nevertheless, the bank added that concern was not translating consistently into investment action. “Renewable energy is the most obvious way to address climate change issues, but renewable energy investments have markedly underperformed in recent months with substantial outflows,” noted the authors of the report.
Attitudes to policy intervention are also conflicted, they added, explaining. “Survey results suggest that there is not great support for further taxation or accounting requirements in the sustainable transition. But a separate question shows 80% of respondents wanting stronger international regulation to achieve biodiversity and ocean protection, with an accompanying belief this will have a positive long-term impact on the economy and therefore investments. Investors therefore appear in favour of regulation to protect the environment (and perhaps to open up new areas), but less keen on regulation directed towards the activities of individual companies.”
‘Limited’ ESG knowledge
Revealingly, just 3% of respondents believed they had an ‘advanced’ knowledge of ESG, with 15% saying that they had a ‘good’ grounding in the subject. In contrast, 82% said they had only ‘some’ or ‘limited’ knowledge of this area.
The bank also reported that doubts were growing over whether ESG could improve portfolio returns. “The proportion strongly or slightly agreeing that it can boost portfolio returns falls from 41% in 2022 to 31% this year – with the proportion of those strongly or slightly disagreeing rising from 17% to 24%,” noted the report’s authors. “We asked a slightly different question in the 2021: then 3% of respondents expected much higher returns if some or all of investment was based on ESG criteria, and 32% higher returns.”
Impact ‘here to stay’
Striking a similar tone, the German firm PATRIZIA said last week that 70% of respondents to its PATRIZIA Client Survey 2023 thought ESG criteria was an important part of their investment process. The observation was made in a piece outlining the firm’s views on impact investing.
“Impact investing is here to stay,” said Saskia van den Bronk, the firm’s head of capital markets, Netherlands. “It’s a strategy still in its infancy. Fortunately, the realisation we are falling behind rather than moving ahead in achieving the SDGs is gaining ground. Some sceptics speak of hype, but we emphatically do not believe that.
“Fortunately, many regulations are coming and regulators are steering towards a minimum allocation for impact investing. Pension fund members, especially young people, are also increasingly getting involved in the discussion. In Denmark, for instance, they can already opt for ‘socially responsible investments’.”
