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ESG investing is the ‘new normal’ in Europe

But the Belgians are streaks ahead of the Swiss


Pete Carvill

A report from Mercer looking at ESG investing across Europe has called the asset class ‘the new normal’.

European Asset Allocation Insights 2021 is one of a series of four with chapters looking at defined benefits trends, UK defined benefit de-risking, and defined contribution trends. It found that the vast majority of investors have firmly embedded ESG considerations in their investment process. It was a trend, the authors said, that had been exacerbated by the covid-19 pandemic.

Mercer said that 76% of respondents to its survey across Europe were considering ESG risks. However, the authors added, “There was considerable variation by country, though: while Swiss plans in our survey are laggards in terms of considering ESG risk, all of our Belgian participants considered ESG risks in their plans.”

80% of Swiss plans, it must be pointed out, made no considerations for ESG. After Belgium, the country with the largest majority of plans with ESG considerations was Spain, with 92% taking this issue into consideration in regard to its investments.

Dented progress

ESG investing had a good year, according to the report. Its authors wrote: “Sustainable funds gained large net inflows over the year, with funds in Europe acquiring an extra $233bn in new money, almost double the amount in 2019 as investment in sustainability gathered momentum.”

Despite the herald of good ESG news, Mercer was more downbeat about the world economy. The report’s authors wrote, “The relatively brief crash in March 2020 aside, equity markets returned with a vengeance and posted strong positive returns over 2020, with the MSCI ESG Leaders index returning 5.8%. However, market returns glossed over the dent in the progress to a more sustainable future caused by covid-19 and the emasures to combat it, as an estimated 71m people joined the ranks of those in exrtreme poverty and school closures kept 90% of all students out of school.”

Mercer’s research follows allegations last week that the EU was not doing enough to promote sustainable investment. Findings from the European Court of Auditors looked at a number of areas and found systemic problems with the EU’s work, following the signing of the Paris Agreement in 2015 and the bloc’s own Sustainable Finance Action Plan (SFAP), which was established in 2018.