The popularity of sustainable investments has increased enormously as a result of the increasing focus of investors on the impact of environmental, social and governance factors on the realised returns.
Mary Pieterse-Bloem, Professor of Financial Markets at Erasmus School of Economics and Global Head Fixed Income at the Global Investment Center of the Private Bank of ABN AMRO, investigated the sustainability preferences of wealthy private investors and the impact of sustainability ratings on their asset allocation decisions together with Amir Amel-Zadeh of Oxford University and Rik Lustermans of Erasmus School of Economics. But what about these preferences during a pandemic?
Sustainability preferences
Before the crisis, wealthy private investors already had a greater preference for investments in companies with a high sustainability rating. Research by Mary Pieterse-Bloem, in collaboration with Amir Amel-Zadeh and Rik Lustermans, shows that in the years 2016 to 2019, companies with a good sustainability rating received 15 percent more investments from wealthy investors each month than companies with a low rating. The rapid growth due to popularity, which came at a time of record highs on the stock markets, was also welcomed with a great deal of cynicism. Skeptics argued that asset managers and their clients would quickly drop ESG (Environmental, Social and Governance) investments at a time when markets were becoming volatile again and it was more difficult to make a profit.
Impact of the corona crisis on ESG-investments
The outbreak of the corona pandemic and its enormous impact on the economy are a first test of how committed investors are to sustainable investments. It is still too early to draw far-reaching conclusions, but critics appear to be wrong. According to Rob Morgan, pension & investment analyst at Charles Stanley, one reason for choosing ESG-investments is that the current crisis puts the role of reputable companies in the spotlight. He also believes that the pandemic reminds us of the fact that we are all part of something much bigger and that we should not only think about ourselves. A feeling that is reflected in the investments we make. Andrew Lee, head of sustainability and impact investments at UBS Global Wealth Management, argues that the pandemic is accelerating sustainable investment. The health crisis highlights the link between sustainability issues, the economy and the financial performance of companies, thereby increasing investor attention to these issues.
The last months have shown that, regardless of the sector, strong sustainability characteristics have been helpful for businesses during the crisis and that investors are increasingly opting for sustainable investment strategies. In other words, the pandemic has increased the attractiveness of ESG-investments.