Sustainable investments aren’t exactly, well, sustainable. In theory, they sound viable – and many can become revolutionary in terms of their economic gains and the changes made in their respective industry. But investments that rely on green methods or practice are still a gamble.
Europe seems to be at the top of the environmental game. Just look at their strides in emission reduction targets, and it’s safe to say they are ahead of most developed nations when it comes to sustainability. Nevertheless, a report by Schroders, cites that 82% of European institutional investors believe that sustainable investment is challenging.
Findings by country:
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27% of European investors found it very challenging (to invest in sustainable projects), and 51% found it somewhat challenging. A further 22% did not find it challenging at all.
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European investors seem to be on par with Asian investors – 28% who found it very challenging, while 49% found it somewhat challenging. Both countries had investors who perceived sustainable investments to be particularly difficult.
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Overall, across Northern American, Latin American, European, and Asian investors, 21% found it very challenging, 56% somewhat challenging, and 23% no challenging at all.
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The report also indicated that institutional investors were not convinced that sustainable investments could generate satisfactory returns. Performance was the main challenge.
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It seems like transparency was the biggest challenge, as 50% of European investors cited this, followed by difficult measuring risk at 33%. European investors believe that if investing sustainability could deliver better returns, then they would be more inclined to adapt sustainable investments.
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For 27% of European investors surveyed, greater transparency from companies on financial and non-financial performance reporting was important in helping them make sustainable investments.
Overall findings:
The report found that three-quarters of the 650 institutional investors across Asia, Europe, and Latin America believed that sustainability could be important over the next five years. Only half of those had increased their allocation to sustainable investments. Currently, the report suggests that anticipation of the role of sustainability outweighs actual investment. The discrepancy between anticipated importance and investment could be driven by many challenges that institutional investors face when they consider sustainable investments.
Overall, only a quarter said that sustainability had a significant influence on their investment decision making, 41% said it had moderate influence, and 32% said it had little to no influence.
European investors are still making strides, with 60% saying that they had increased their sustainable investments over the last five years, while 26% said it remained unchanged, and 32% said it had little to no influence.
It’s important that investors continue to believe in sustainable projects as not only economically viable options, but also to uphold ideas about corporate social responsibility and environmental stewardship. Poor ideas about sustainability might possibly trickle down to the rest of society who view corporate priorities as a reflection of their own.
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