There are numerous European pension funds that invest in sustainability and this is because, given their long-term objectives, they are the most suitable subjects to fill the deficit of investment necessary to achieve the United Nations Sustainable Development Goals (SDGs), which is still equal to 4 trillion dollars, especially in energy, water and transport infrastructure.
This was revealed by research by Goldman Sachs Asset Management on pension funds, which involved 126 fund managers and top managers across Europe, who manage assets with a size ranging from less than 500 million dollars to more than 50 billion.
How much do ESG factors weigh in strategies
The survey also shows that 87% of European pension funds believe that sustainability is a critical factor in investment choices. THE Furthermore, pension funds pursue this commitment with conviction: 63% of interviewees allocate more than 10% of their portfolio to sustainable investments and 45% allocate more than 20% of their portfolio to the ESG category, in particular on
Where to invest
The funds mostly invest in developed market equities (72%) and investment grade bonds (65%) to pursue their sustainable investment strategy and orient their portfolios based on environmental and governance criteria. The sectors where most investments are made are infrastructure (42%) and real estate (38%).
However, as regards the sustainability factors that pension funds take into consideration in portfolio allocation, in the lead are the exclusions in relation to the involvement of products (57%), exclusions in relation to corporate conduct (50%), objectives on Scope 1 and 2 emissions (47%), exclusions in relation to the geographical origin of the investor (34%). 26% also look at specific SDGs and 16% at Scope 3 emissions objectives.
Which goals are most urgent?
Risks related to the climate transition (with 75% of preferences) are at the top of the list of core issues for pension funds who invest in sustainability, followed by governance strong (61%), human rights (49%) and physical climate risks (49%). And this, according to Goldman Sachs Asset Management, demonstrates the extent of pension funds’ commitment to sustainable investing across the ESG spectrum.
The reasons that drive investing in ESG factors
The opinions expressed in the survey highlight that investors’ focus on sustainable investments is both a financial issue, as well as one of risk mitigation and return generation. Almost a third of those interviewed (30%) say that the main reason for implementing a sustainable investment approach is a manager’s fiduciary responsibility, while a fifth (21%) cited risk mitigation as the reason.
Analyzing this topic, it turned out that most of the respondents (84%) believe integrating ESG criteria into investment decisions can help reduce long-term risks, and more than half (55%) say this approach can generate alpha. (Teleborsa)