LONDON (2 October 2019) - Aon plc, a leading global professional services firm providing a broad range of risk, retirement and health solutions, has released the results of its 2019 Global Perspectives on Responsible Investing survey which found a huge increase in the importance of responsible investing (RI) to institutional investors across geographies, investor types and firm sizes.
The biggest gains in positive sentiment were in the UK, where the percentage of respondents who stated RI was very important or critical to their organisation, rose from 19% in 2018 to 42% in 2019. Investors polled in the UK were the most likely to have a responsible investment policy in development, at 32%.
Tim Manuel, head of responsible investment for Aon in the UK, said:
“In the UK, where regulations in favour of responsible investing continue to strengthen, we see investors taking more concrete steps to implement responsible investments within their funds. It’s indicative of this frame of mind that we saw a high response to the survey here, with 43% of the respondents overall being UK based.”
Across all respondents, the most popular primary motivation for pursuing responsible investing was the belief that the incorporation of environmental, social and governance (ESG) data leads to better investment returns. But in the UK, interest goes beyond financial concerns and regulatory frameworks. Non-financial motivations featured strongly for UK investors. Many UK (and European) respondents indicated that they were motivated to engage in responsible investing to impact global issues such as climate change, diversity or social justice. By contrast, only 10% of US investors and 8% of Canadian investors indicated global impact as a motivator.
Tim Manuel continued:
“It’s encouraging that investors recognise the increasing leadership role of the UK in this area. While Europe maintained the top spot as the region respondents believe will lead responsible investing in the future, the UK now holds a clear second place.”
Global perspectives
Aon’s survey of nearly 230 investment professionals showed that globally, 85% report responsible investing is at least somewhat important to their organisation, up from 68% in the 2018 survey. This growth occurred across all geographic regions and institutional investor types, which include corporate pensions, public pensions, endowments and foundations, and defined contribution plans. The increase in those that believe RI is at least somewhat important, was by region:
- United Kingdom: 87%, up from 66% in 2018
- United States: 78%, up from 57% in 2018
- Canada: 78%, up from 68% in 2018
- Continental Europe: 85%, up from 80% in 2018
Meredith Jones, author of the report and global head of responsible investing at Aon, said: “I am sure it comes as no surprise that responsible investing is growing in importance in regions like the UK and Continental Europe, where there’s been a marked increase in RI regulation, However, we are also seeing significant investor-led RI efforts in areas where regulation is not driving activity. It seems institutional investors are increasingly concerned about risks associated with non-financial factors within their portfolios, and RI offers multiple ways to capture, evaluate and mitigate those risks.”
In addition to rapidly increasing interest in RI, the implementation, particularly in geographies with strengthening RI regulatory frameworks, is also expanding at a brisk pace. Globally, 44% of the investors polled report an RI policy is already in place, while another 24% have an RI policy in development - both increases from 2018. One of the hurdles to implementation has been the question of how RI might impact returns, but this concern appears to be waning.
More than 40% of those polled believe that the incorporation of non-financial environmental, social and governance (ESG) data results in better investment performance. One third of those polled believe responsible investing is ‘nearing a tipping point’, an increase of nearly 10 percentage points from the 2018 survey. In addition, 64% of respondents allocated assets to some type of responsible investing strategy, up from 49% in 2018. Of those respondents, 59% indicated that they would maintain or increase their allocations to RI in the coming year.
Despite these gains, relatively ambiguous regulatory policies in the United States may be holding investors back from RI. Of those polled in the US, 44% indicated that RI plays no role in their investment decision making, compared with 29% in Canada, 27% in Continental Europe and 11% in the UK. Globally, the percentage of respondents who do not consider RI in the manager selection process dropped from 37% to 29%.
Meredith Jones added:
“The staggering increase in RI sentiment and activity we witnessed in our 2019 survey makes one thing abundantly clear: responsible investing is officially a going and growing concern. The changing regulatory framework will play a larger role in some investors’ RI endeavours, while others will adopt increasingly mainstream ESG integration, and still others will embrace roles as global change agents. Regardless, institutional investors seem to understand that the world will look very different in the coming years and are evolving now to meet the investment challenges that lie ahead.”
Additional key findings from the 2019 Global Perspectives on Responsible Investing report include:
- Corporate pensions made huge gains in positive responsible investing sentiment over the last year, growing from 56% in 2018 to 86% in 2019. Public pensions saw similar growth, growing from 70% in 2018 to 92% in 2019.
- Smaller investors are more likely to consider RI ‘mission critical’, (10% for smaller vs. 4% for the largest organisations), but the largest asset owners are more likely to have both a responsible investment policy and dedicated RI staff (42% for the largest investors vs. 24% for smaller investors).
- Dedicated responsible investment staff also grew over the past 12 months in all geographic regions, with staff present in 29% of the investors polled, up from 20% in 2018.
- Lack of agreement on key issues, such as terminology and materiality, is a hindrance for 14% of those polled, down from 26% in 2018. The industry continues to struggle with what constitutes ESG, socially responsible investing, and impact investing, which can cause confusion among even the most well-intentioned investors.
- While Continental Europe maintained the top spot as the region respondents believe will lead responsible investing in the future, the US dropped from the number two spot in this year’s survey to a third place. This is most likely due to policy gaps in the US and regulatory advances in the UK, with the latter now holding second place by a margin of 14 percentage points.
- Institutional investors remain concerned about a variety of global issues, but climate change/natural disasters rank first (67%), followed by nationalism/protectionism (50%), and socio-economic inequality (38%).
The 2019 Global Perspectives on Responsible Investing report is available here, which includes additional detail and data about actions by investor type and by geographic region.
Methodology
Aon conducted a global survey of Aon clients and institutional investors from early May 2019 through to late July 2019. The survey captured the sentiments of 229 investment professionals globally who represented a range of portfolio size from less than USD $500 million to $5 billion. Smaller investor organisations are defined as less than $500 million in assets under management (AUM); mid-sized organisations as $500 million to $5 billion, and the largest organisations as $5 billion or more. Responses from the survey were analysed and aggregated to create summary results.
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Notes to Editors
About Aon
Aon plc (NYSE:AON) is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance.
Aon announced in May 2018 it will retire the business unit brands of Aon Benfield and Aon Risk Solutions, which follows the retirement of the Aon Hewitt business unit brand in 2017. This move was designed to increase the rate of innovation across the firm and make it easier for colleagues to work together to bring the best of Aon to clients. Aon has five specific global solution lines: Commercial Risk Solutions, Reinsurance Solutions, Retirement Solutions, Health Solutions and Data & Analytic Services.
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