Sustainable investment have moved from being a niche concern to a mainstream strategy among US asset managers, according to new research.
The research found that 75 per cent of US asset managers say firms now offer sustainable investment strategies. This is an increase from 65 per cent in 2016.
Those surveyed overwhelmingly agreed that sustainable investing is no longer a fad, with nine in 10 (89 per cent) saying it is here to stay, and 63 per cent expecting it to continue to grow in the next five years.
The research, by Morgan Stanley and Bloomberg, found that asset managers were embracing these strategies as a way to build business. Sustainable investment strategies were also seen as a way to boost financial returns.
More than eight out of 10 managers surveyed said strong ESG practices can lead to higher profitability and that companies with such practices may be better long-term investments.
Respondents cited several key drivers of this growth in sustainable investing. These included increased investment stability, high client satisfaction, product popularity and possible high financial returns.
A recent Corporate Adviser report has examined the growth of sustainable and ESG strategies in the DC market in the UK.
Morgan Stanley’s head of global sustainable finance Matthew Slovik says: “The survey results demonstrate that sustainable investment strategies are now a strategic imperative.
“It is clear that asset managers will continue to invest new resources and expand their product portfolios in the coming years.”
Despite the recognition of the strategy as a business imperative, almost all asset managers highlighted the need for increased expertise and better data and impact reporting to drive future growth in this space.
Nearly all (89 per cent) respondents said their firms will devote more resources to sustainable investing in the next two years. Common strategies for developing in-house skills and capacity include employee training (41 per cent), dedicating more employee time (36 per cent) and specialist hires (34 per cent).
Bloomberg’s global head of sustainable business & finance, Curtis Ravenel says: “As investors increasingly consider sustainability factors across asset classes and investment products, we expect to see a shift toward better data tracking and reporting mechanisms.
“This will increase credibility and improve measurement of impact across portfolios.”
The survey polled 300 respondents at US asset management firms with at least $50 million in client assets.