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The Actuary The magazine of the Institute & Faculty of Actuaries

Investors report growing interest in sustainable development

Environmental, social and governance (ESG) issues are becoming increasingly important to investors worldwide, an annual survey by PricewaterhouseCoopers (PwC) has found.

"Increasing maturity" in ESG development ©Shutterstock
"Increasing maturity" in ESG development ©Shutterstock

After gathering the views of 162 private equity firms and limited partners from 35 countries and territories, it was found that 81% report ESG matters to their boards at least once a year.

A massive 91% have a responsible investment policy in place or in development, compared with 80% in 2013, with three-quarters of these using key performance indicators.

In addition, 35% of the respondents have a team dedicated to ESG matters, up from 27% in 2016.

PwC’s global private equity, real assets and sovereign fund leader, Will Jackson-Moore, said these are signs of “increasing maturity” in the development of responsible investment.

“Private equity houses and limited partners are driving genuine change,” he continued. “That is especially important as their role in global capital markets increases.

“It is heartening to see that responsible investment is seen as a matter for those at the heart of the investment process, and needs to be supported by rigorous monitoring and reporting.”

The research also shows that 67% of the investors have identified which of the UN’s Sustainable Development Goals (SDGs) are most relevant to their investments.

This is significant increase on the 38% that had done so in 2016, while the number with a proactive approach to monitoring portfolio performance against SDGs has jumped from 16% to 43%.

Moreover, it was found that 76% are concerned about the impact of human rights abuses on their portfolios, with 83% worried about climate risk, although just 31% have acted on the latter.

“We are at the stage that we can see ESG genuinely driving returns, and enhanced ESG practices can potentially enhance multiples: it may well be the next big value lever," Jackson-Moore said.

“It is therefore vital for investors to recognise that, even if responsible investment may seem challenging, there are numerous solutions and frameworks that can be applied to achieve positive outcomes.”

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