Investors that integrate ESG within their strategies are twice as likely to outperform says Invesco in a new survey.
The survey questioned 138 institutional and 100 wholesale factor investors, together responsible for managing over $25trn in assets. It showed that 36% of factor investors that had integrated ESG within their strategies exceeded their return expectations in the past 12 months compared to 19% that did not. The number of investors undertaking factor exposure analyses on their ESG portfolios has risen sharply in the past year, rising from 34% to 58% for institutional investors and 29% to 53% for wholesale investors.
The percentage of institutional investors that think that ESG complements the performance of factor strategies increased to 64% from 45% in 2019.
A majority of institutional investors (85%) said ESG boosted returns and helped manage risk (90%). 92% observed either a positive or neutral effect on their portfolios.
“Some investors told us that ESG had helped them weed out poorer-quality firms, and others suggested that it offered a means to manage short-term downside while providing long-term potential upside,” said Georg Elsaesser, senior portfolio manager of quantitative strategies at Invesco. These are interesting findings, but we should interpret these statistics cautiously given they don’t capture the individual circumstances of each investor. One explanation for this outperformance could be the avoidance of struggling oil and gas stocks, which are of course usually excluded from ESG-oriented portfolios.”