The majority of UK pension schemes have made a net-zero commitment, or plan to do so soon, according to the latest Aon survey.
Its ‘2022 Global Perspectives on Responsible Investing’ survey shows there has been as significant shift in the institutional investment landscape over the last two years, with 19 per cent of UK asset owners already committed to aligning their portfolios to net zero by 2050 and a further 53 per cent intending to do so soon.
The global survey polled 155 investment professionals in the UK and found that 84 per cent of respondents engage with responsible investment through environmental, social and governance (ESG) integration. Nearly half (48 per cent) have a responsible investing (RI) or ESG policy in place and are actively making changes to investments as a result.
The survey found that asset owners who invest responsibly were broadly happy with the performance of these funds, with 73 per cent of those invested in responsible investments saying that they are either ‘satisfied’ or ‘very satisfied’ with their returns to date.
Aon says that some of the perceived barriers to adoption have fallen, including the risk-return trade off, which in the past made investors sceptical about ESG investing. It points out that responsible investing now has a track record, and performance is no longer hypothetical.
However the research showed that some barriers to adoption remain, notably the availability of reliable data. This is still a roadblock to implementation for 18 per cent of UK schemes. For responsible investment to become even more compelling, nearly half of respondents want to see better or more consistent data on ESG factors. Similarly, 37 per cent want greater industry agreement around definitions.
When it comes to ESG issues, climate change is the most pressing investment concern for the majority of respondents (68 per cent), followed by socio-economic inequality (28 per cent), cyber risks (26 per cent) and biodiversity loss (26 per cent). Respondents representing defined contribution (DC) plans tended to have a broader range of concerns than those with defined benefit (DB) plans. One reason for this is that DC activity is often driven by its members, who are increasingly aware of ESG issues and are more directly engaged than their DB peers.
Aon partner and co-head of responsible investment Tim Manuel says: “As the lasting impacts of the Covid-19 pandemic become clearer, and strains on the environment and society increase, the influence of responsible investing among UK institutional investors will continue to grow.
“Active awareness and appetite for change is visible globally and especially among UK scheme members, many of whom are calling for their investments to have strong ESG credentials. As new forms of volatility emerge, we expect these priorities to evolve and come into sharper focus.”
