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ESG Phenomenon: US Clients Lag On Sustainable Allocations

Editorial Staff, 18 February 2021

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Developments and commentary in and around the ESG investment space.

Cambridge Associates
As interest in sustainability gathers steam, Cambridge Associates, a significant force in the sector, has seen a near 150 per cent increase in institutional sustainable Investments among clients over the past four years. The firm said that nearly two-thirds are now actively engaged in sustainable, impact or ESG investing, roughly double the figure two years ago.

Its biannual client survey looking at the evolution of the sector not surprisingly found the UK and Europe leading the way. Nearly a third of the firm’s non-US respondents  engaged in impact investing have over half of their long-term portfolios in sustainable allocations. This compares with half of US repsondents holding less than 5 per cent  in sustainable investments long term.

Chiming with the broader picture, climate change and resource efficiency were the two top priorities among those surveyed in 2020.

The 202 respondents represent a globally diverse group of institutions; but the majority are foundations, colleges and universities, CA said. Around a third of those signalled that they are now considering racial and/or gender equity themes in their investment decisions.

They continue to use a range of strategies, including ESG integration, impact investing, negative screening, and program-related investments, the report found; and revealed a notable shift away from negative screening towards integrating sustainability measures that investors see as a source of competitive advantage.

“We are particularly proud to be working with some real thought leaders in endowments and foundations who are setting ambitious objectives like the achievement of net carbon zero,” said Annachiara Marcandalli, head of sustainable Investing for Europe, whose clients’ assets range from $75 million to $4 billion.

She said the firm is also seeing private wealth owners and family offices at the forefront, "driven by a long-term time horizon that is a natural match to sustainable investments, personal values, and the interests of next-generation family members."

The 300 Club
The 300 Club, a group made up of major investment professionals from across the globe, at organisations such as California’s CalSTRS, Federated Hermes and Avida International, has launched a white paper claiming that the current investment management industry is not “fit for purpose”.

The document, called The Role of the Investment Management Industry and a Prescription for the Future, said portfolio managers should focus on long-term absolute returns (generally seven years or more) with levels of absolute risk to capital and time-horizons being set according to the particular needs of the investors being served. Fees and manager incentives must be changed to support “sustainable wealth creation,” it said.

“The current pandemic has created a moment for soul-searching on the state of the investment industry. During this crisis, we have all been reminded that companies should not just be profit-generating machines but purposeful providers of long-term sustainable wealth creation and solutions that benefit the individuals that make up society,” Stefan Dunatov, Chairman of The 300 Club, said. “The means to achieving the goal of sustainable wealth creation is the careful stewardship of investors’ capital in the way it is allocated and active stewardship of those investments once they are made. Both active and passive managers can play a vital role by working together collectively on this.”

Besides Dunatov, who is executive vice president, investment strategy and risk, British Columbia Investment Management, other prominent figures at The 300 Club are Chris Ailman, Chair, 300 Club North American Chapter; chief investment officer of the California State Teachers' Retirement System (CalSTRS); Jaap van Dam, chair, 300 Club European Chapter; principal director of investment strategy at PGGM; Sally Bridgeland, member, 300 Club; senior consultant, Avida International; Dame Elizabeth Corley, member, 300 Club; chair of the Impact Investing Institute, and Saker Nusseibeh, CBE, founder, 300 Club; CEO, International at Federated Hermes.

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