‘Responsible investing’ takes centre stage as investors get ethical

Investors in the alternative investment industry are increasingly prioritising ethical, environmental and social issues when they decide where to put their money, new research suggests.

A new survey of asset managers, insurance companies, wealth funds and private and public pension funds finds ‘responsible investing’ is growing in importance as organisations and individual look to invest in assets that meet ethical principles and benefit society, not just themselves.

But the report, from the Chartered Alternative Investment Analyst Association (CAIA) and private equity house Adveq, also shows that more work needs to fully support the “growing demand” for responsibly-driven alternative investments.

‘More important’
77 per cent of respondents to the survey think responsible investing is more important than it was three years ago and 78 per cent expect it to grow in importance over the next three years.

Respondents said the chief benefits of responsible investing are alignment of ethics and values (71 per cent), meeting client or constitutional requirements (58 per cent) and improving marketing strategies and brand reputation (50 per cent).

Adoption of industry standards (71 per cent), pressure from institutional investors (67 per cent) and positive investment returns (64 per cent) will be the largest incentives to greater adoption of responsible investment approaches.

‘Tipping point’
“Responsible investing seems to be at a tipping point right now. It is garnering increased interest and momentum, which will likely accelerate in the years to come,” said William J. Kelly, chief executive officer of the CAIA.

“To support this demand, a more institutional infrastructure is needed including common standards, increased information and education.”

The report also found that 84 per cent of respondents think responsible investing lacks clear industry standards and 89 per cent think “better-defined” standards would aid its development.

“There are increasing opportunities for institutions and individuals around the world to invest in ways that match their ethical principles and benefit themselves and society as a whole,” said Lee Gardella, managing director and head of risk management at Adveq.

“Responsible investing is here to stay. With increased coordination of efforts among asset owners, asset managers and consultants, as well as education, data and standards providers, identifying responsible investing opportunities and managing policies and programs will be increasingly efficient and effective.”

Implementation problems
Survey respondents reported a number of challenges to implementing responsible investment policies: lack of comparable data (69 per cent), managing varied constituent requirements (44 per cent) and lack of dedicated resources (42 per cent).

47 per cent of respondents said their organisations have professionals who specifically oversee responsible investment projects.

Adveq and the CAIA said they will use the results of the survey to better understand and educate others on the role of responsible investing in the alternative investment management industry.

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