ESG factors more important to investors than financial metrics

ESG trumps financial metrics

Almost nine in 10 (88 per cent) of institutional investors believe ESG factors are more important than financial metrics when judging a company’s long-term attractiveness, according to a study from Federated Hermes. The ‘responsible capitalism’ survey polled 100 institutional investors, and found that 78 per cent of respondents said environmental factors like energy efficiency carry more weight than they did a year ago, while 69 per cent of respondents said the same of corporate governance risks. Most investors (85 per cent) said engagement with companies through stewardship is an effective tool for achieving investment objectives with an ESG lens, while 78 per cent believe engagement activity has become more effective over the past three years.

Investors flee companies that do not act on ESG

Relatedly, a survey from PwC found that nearly half (49 per cent) of investors said they could be forced to divest from a company that does not address ESG issues. PwC’s ‘Global investor ESG study’ found that 59 per cent of the 325 respondents polled said ESG inaction made them more likely to vote against an executive pay agreement, while a third said they already had. Eighty-two per cent of respondents said that ESG factors need to be embedded in corporate strategies, but the quality of ESG reporting was a cause of significant concern, with only a third of those polled saying the quality of reporting they see is “good”. A single set of ESG reporting standards was widely cited desirable, with 74 per cent of respondents saying it would aid their decision-making.

Make My Money Matter charter gets more signatories

The Co-op, Innocent Drinks, and Comic Relief are among a raft of companies to sign up to Make My Money Matter’s Green Pensions Charter ahead of COP26, the campaign group announced. The pledge requires signatories to take steps to ensure that their workplace pensions are invested sustainably and was created in response to growing demand for green pensions, which Make My Money Matter argues that the industry is so far failing to meet. Recent research from the group revealed that 18m pension holders would like a green pension if given the chance, but almost three-quarters (70 per cent) of major UK pension schemes have failed to act on climate change.