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The results of the CIO Sentiment Survey broken down into investment impact and themes

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ESG

Whether a sustainable sleeve in a portfolio, a successful screen for investments or ambitious targets around carbon neutrality, the annual CIO Sentiment Survey shows pension funds’ shift to integrate ESG and sustainability in their portfolios is progressing.

However, against this backdrop one data set stands out. The percentage of respondents citing climate change as their top risk in the next three years - above other risks like volatility, rising interest rates or inflation - jumped from 3 per cent in 2020 to 5 per cent in 2021.

"US investors are still trailing when it comes to integrating ESG"

% of Respondents citing climate change as the top risk in the next three years

+85%
3%
2020
5%
2021

key:

2020
2021

%of portfolio deployed in ESG

Median by region (controlled for allocation of total portfolio), expected 2024 allocation

No ESG
integration
Portfolio
Exclusions
ESG 
Integrated
Sustainability
Labelled
Impact

key:

EMEA
APAC
APAC

Perhaps tied to CIOs heightened awareness of climate risk, survey data also revealed a spike in asset owners’ awareness of regulatory risk.

The regulatory pressure is certainly growing in the EU. This year the green policy pioneer is poised to introduce its ground- breaking taxonomy that will list activities it deems environmentally sustainable. Elsewhere, from this October UK pension funds will have to comply with new mandatory requirements to report on the financial risks of climate change within their portfolios.

“Interest in ESG remains bifurcated by region, but interested managers need to have credible, fully integrated platforms”

Anthony Skriba, senior consultant, Casey Quirk 

ESG might be front of mind for some funds, but CIO respondents also revealed less encouraging trends. US institutional investors continue to eschew any form of ESG integration more than any other region with 41.4 per cent of North American pension fund respondents saying they have no ESG allocation at all.

Elsewhere the data revealed that institutional investors in EMEA integrate sustainability via portfolio exclusions more than any other region, as well as allocating more than all APAC or North American peers to sustainability labelled and impact investment – with impact now accounting for 11.9 per cent of EMEA investors ESG allocation.

The analysis also showed that firms with significant ESG integration have key areas of focus that characterise their strategies. Namely a keen articulation around ESG integration, a strong senior management commitment to ESG, and robust collaboration with external managers around ESG.

Importance of ESG Factors

For respondents with at least 50%+ ESG deployment, 2021

Articulation of ESG Integration
94%
Senior Management Commitment
65%
Collaboration with Managers
59%
Reporting Transparency & Customisation
35%
Returns Commensurate with Non-ESG Investments
28%
Assistance in Assessing Overall Impacts
24%
ESG-Branded Products
18%
ESG Education
6%