11 Jun 2021
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Asian respondents are committed to increasing ESG engagement and indicate an increasing shift towards alternative investing
- Most dominant theme for investors in 2021: The pandemic, the move to alternatives, ESG integration
- 700 global institutional investors and consultants, including 158 across Asia Pacific.
- Barriers to alternative investment remain, including complexity of deals, investment limits and liquidity provision
- 28% of respondents across Asia Pacific believe that ESG investing is a trend rather than a core long-term strategy, although 65% are committed to increasing active engagement on the topic
According to Nuveen’s inaugural global institutional investor survey, the ongoing global pandemic, the shift to investing in alternatives and ESG integration are the most powerful themes shaping investment decisions in the Asia Pacific region in 2021. Of those surveyed, 52% of respondents in Asia Pacific believed the pandemic would be the greatest driver of change to asset allocation and investment strategy in the coming year. Of Asia Pacific respondents, 44% also said they planned to a strategic shift away from public to private markets in 2021 and 65% said that increasing active engagement with companies they invest in was the most important way to influence ESG factors.
“With simultaneous crises in global public health as well as economies and markets worldwide, 2020 offered us an extraordinary opportunity to assess the practices and attitudes of major institutional investors in managing both portfolios and day-to-day operations,” said Simon England-Brammer, Senior Managing Director, Head of Distribution, Asia Pacific.
Perhaps unsurprisingly the pandemic was a strong driver shaping investment decisions for the year ahead, but additionally respondents in Asia Pacific pointed to alternatives and ESG as playing a significant role in their portfolio construction for 2021.”
The inaugural Nuveen Global Institutional Investor Study surveyed a total of 700 investors and consultants around the globe, including 158 across Asia Pacific. All institutional investor represent organisations with at least US$500 million in assets.
The research shows 81% are invested in alternatives, however significan barriers remain such as complexity of deal (72%), liquidity provision (69%) and investment limits (66%) respectively responding that liquidity provisions and investment limits are the greatest barriers.
Meanwhile, when it comes to ESG, 62% of respondents agreed it is about fully integrating material ESG factors into investment decision-making. However, only 31% believed that ESG factors are valid drivers of alpha and 28% responded that they thought ESG was a trend rather than a core, long-term investment strategy.
“More and more, market research is helping make the case that ‘responsible investing’ can deliver competitive returns, but clearly there is a need to put more effort into validating the investment proposition along with the positive impact,” said Amy O’Brien, Global Head of Responsible Investing. “The marketplace would benefit from more attention and focused effort on helping prospective ESG investors resolve concerns and clarify objectives for their stakeholders and themselves.”
Despite some of the clear challenges those surveyed expressed about investing in alternatives and ESG integration, their responses also indicated that their organisations have clear strategies for tackling these areas.
For instance,, 67% of respondents in Asia Pacific said they were likely to expand their internal team, such as hiring, education, etc. to overcome the challenge of investing in alternatives and 53% seeking new strategic partnerships for co-investment.
Similarly, when it comes to ESG, respondents were committed to problem solving, with 44% said they would prioritise ESG as a tool for positive impact (e.g. sustainability, social good, etc.) and 45% indicated they want to collaborate with peers to shape best practices.”
Simon continues: “Whether navigating the challenges of a global pandemic, developing new approaches to alternatives amid a strategic shift to private markets or turning ESG desires into reality, asset owners and consultants are navigating complex, high-stakes decisions that are defining the future of investing.
“This survey has allowed us to explore these critical topics in order to help us better understand the beliefs and mindsets that are leading to action in each of these topics and to better help our clients achieve their goals with clarity and conviction.”
Responsible investing incorporates Environmental Social Governance (ESG) factors that may affect exposure to issuers, sectors, industries, limiting the type and number of investment opportunities available, which could result in excluding investments that perform well.