Global investors are increasingly assigning greater importance to how environmental, social and governance (ESG) factors impact their returns in the long run, according to a report by AXA Investment Managers.
The report said impact investing – which entails investments in businesses or funds that seek to generate social or environmental benefits alongside financial returns – has started to catch the attention of institutional investors globally.
"In the last 12 months we have worked with several European pension funds as well as AXA Group to help them take responsible practices into account more explicitly," AXA IM global head of responsible investment Matt Christensen said.
Whilst the impact investing market is still relatively young, growing client demand has resulted in initiatives that have enhanced its credibility, such as the setting up of impact reporting and investment standards and the global impact investing rating system, Christensen said.
The report also revealed that a number of academic studies have shown there has been no penalty for pursuing a responsible investment approach, which was a concern for some investors in the past.
"Analysing assets according to ESG factors as well as traditional financial factors can uncover risks and opportunities that might otherwise not come to light. Responsible investment analysis is simply a good risk-aware way to manage a portfolio," Christensen said.
