Social and environmental factors will become just as vital a part of the investment management process as profit statements and price to earnings ratios, the majority of investment managers believe.
A new survey of 195 fund managers from around the world has found that most expect socially responsible investment (SRI) factors to become a mainstream part of investment management within 10 years.
And Australian managers are leading the way, with the survey showing they are much less cynical about SRI investing than managers in other countries.
The survey, conducted Mercer Investment Consulting, asked managers whether they believed three key SRI practices – active shareholder ownership, such as engaging in proxy voting, screening for social and environmental factors, and integrating social or environmental corporate performance indicators in investment decisions – would become common place.
Almost nine in ten (89 per cent) managers believed that active ownership would become a common practice within 10 years, according to the survey, while 73 per cent believed measuring social or environmental corporate performance indicators would become mainstream.
The majority of managers (65 per cent), predicted that screening companies for social or environmental factors would become a typical part of the investment process.
Mercer Investment Consulting global leader Tim Gardener said the study proved the majority of investment managers were beginning to believe that social and environmental factors could have an impact on investment returns.
“In the past, it was just a small group of organisations that were interested in SRI, but there are a growing number of mainstream investors who believe these issues can have an impact on long-term investment performance. Investment managers’ views are clearly changing,” he said.
But the belief in SRI practices was not consistent around the world.
While 85 per cent of managers in Australia and Asia believed that all three SRI key practices would be widely used within 10 years, their counterparts in the US were much more sceptical.
Sixty per cent of US managers believed screening for social and environmental factors, or integrating SRI corporate performance indicators, would never become a mainstream practice.
Mercer Investment Consulting global head of SRI Jane Ambachtsheer said: “We see a range of investor approaches to SRI across regions and although managers’ views do vary, it is interesting to note that nearly all predict that SRI practices will become mainstream.”
