Nearly two-thirds of investors in Europe are concerned about greenwashing, even though EU regulation has been in place for more than a year, a new survey released on Thursday showed. More than half of all European investors remain very concerned about the lack of transparency and reported data.
According to Schroder’s 2022 Institutional Investor Study, greenwashing was the top concern for 64 percent of the European investors surveyed, compared to 54 percent in the overall survey, which also included respondents from Asia and the UK. Some 56 percent of the European investors expressed worries over the data needed for assessing sustainable investments.
“Europe being the region where concerns over greenwashing are the highest, this focus on external verification is not surprising, notably in a context where the regulatory framework provides flexibility to define sustainable investments,” Schroders said.
The study, considered Schroder’s annual flagship survey, covered 770 investors and some 27.5 billion dollars in assets. Some 180 respondents were from Europe excluding the UK. It has been conducted annually since 2017. The survey was conducted during March 2022.
Impact investing increasingly recognized
Impact investing is now viewed among the key pillars of sustainable investing, alongside integration and positive screening,the survey has found.
Just under half - 48 percent - of investors said impact investing was their preferred approach to implementing sustainability, a significant increase on 38 percent a year ago and 34 percent in 2020. The survey found the importance of full ESG integration into the investment process had grown as a focus, further cementing it as the most favoured approach among investors.
Sustainable investing coming of age
“Sustainable investing is coming of age as the world changes, regulators step up and investors have a clearer and heightened focus on how they can make a positive impact, and not only generate financial returns,” said Nathaële Rebondy, Schroders’ head of sustainability Europe.
Growing demand for investment solutions focused on the energy transition was also reflected by the findings. Well over half of investors - 59 percent - said that new investment opportunities addressing the energy transition would encourage them to invest more into sustainable investments. This focus was particularly strong in the UK and Asia Pacific where 68 percent and 62 percent of investors respectively highlighted the need for more transition-oriented solutions.
“The findings of today’s influential Study are striking; more and more institutional investors want to measure, manage and deliver impact,” said Andy Howard, Schroders’ global head of sustainable investment. “Recognising concerns over tensions between sustainable investment and return goals, it’s becoming clear that thoughtful approaches grounded in investment experience will be increasingly critical.
‘Cross-currents of concerns’
Amid a more challenged outlook, the study did however find that investors’ confidence in achieving their returns has remained steady – most likely the result of their scaled back expectations. Concerns over global pandemics have markedly fallen in importance as an issue for investors compared with the previous two years.
“Markets continue to be caught in the cross currents of concerns about rate increases and worries about recessionary risks,” said Johanna Kyrklund, Schroders’ group chief investment officer and co-head of investment. “The Study found that investors’ allocations to equities have dipped, reflecting our own house positioning. Indeed, determining what other positions to own around that core defensive position in equities requires a view on whether rates or growth risks are most important.
The survey found that, in terms of the impact on portfolio performance, investors are increasingly concerned over rising inflation and interest rates, hawkish monetary policy stances, global conflicts and the looming threat of a global economic slowdown.
“Our conclusion is to continue to focus predominantly on the consequences of rising rates because traditional inflation models are vulnerable to supply bottlenecks caused by a myriad of unprecedented sources; post-pandemic spending patterns, lockdowns in China and the war between Russia and Ukraine. This leaves central banks focused on normalising policy above all else,” Kyrklund said.
From the Schroders survey:
Click here for the full survey.