Fixed income has emerged as the number one asset class for sustainable investment purposes, according to a global survey by index house, FTSE Russell.
The FTSE Russell poll of 184 large asset owners across the world found more than half of respondents have made fixed income sustainable investment allocations compared to 35 per cent last year.
“And on a regional basis, nearly two-thirds (64%) of [Asia-Pacific] APAC asset owners are allocating to fixed income,” the study says.
By contrast just 45 per cent of those surveyed use public equities to access sustainable investment opportunities.
Infrastructure and real estate also saw big year-on-year jumps as sustainable asset destinations, rising 26 per cent and 18 per cent, respectively, over the period.
Globally, infrastructure is on par with shares as a sustainable asset class with 45 per cent of respondents reporting allocations in the 2022 study.
Investors in the APAC region appear more enthused about sustainability than global peers, too, allocating more to the style across every asset class.
But the survey found sustainable investing is now the norm among almost all asset owners.
“Our research confirms that sustainable investment has become part of mainstream investing: 86% of asset owners globally are implementing sustainable investment in their investment strategies (76% in 2021),” the FTSE Russell report says.
“As part of this growing trend, 44% of respondents are incorporating sustainable investment and climate considerations into their Strategic Asset Allocation (SAA) models or framework, up from 33% in 2021.”
While almost 60 per cent view sustainable investment as a long-term risk management strategy, a growing proportion (42 per cent compared to 36 per cent last year) expect to receive higher returns as a result.
“Representing a shift in sentiment away from reputational risk, 38% of asset owners say their rationale to implement or consider sustainable investment in their investment strategy is to avoid reputational risk, compared with 57% of asset owners in 2021,” the survey says.
“Our research shows that fewer asset owners (45% in 2022, down from 52% in 2021) cite societal good as a reason for implementing or considering sustainable investment in their investment strategy.”
As per usual, investors cite data and regulation as the major stumbling blocks to more effective implementation of sustainable strategies.
About half of asset owners rate fund managers as “credible” sources of sustainable investment information but consultants seem to be losing touch.
The FTSE Russell study shows only 15 per cent of investors ranked consultants as good for advice on sustainability this year, down from 28 per cent in 2021.
In a sad note for the consultancy profession, even trade financial media ranks as a more reliable source of sustainable investment information, garnering support from 38 per cent of respondents in 2022 compared to 23 per cent in the previous study.
Sylvain Chateau, London Stock Exchange (LSE) global head of sustainable investment product management, said the 2022 report reflects a major shift in the global backdrop over the past 12 months.
“… much has happened in the world, which has had a knock-on effect on everything from financial, political and social to environmental/climate,” Chateau said.
Part of the LSE group, FTSE Russell is one of the three mega financial index providers along with MSCI and S&P Dow Jones Indices.