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Responsible investing rapidly becoming critical to institutional investors, according to new Aon survey

CHICAGO (Oct. 2, 2019) - Aon plc, a leading global professional services firm providing a broad range of risk, retirement and health solutions, today released the results of its 2019 Global Perspectives on Responsible Investing survey and found an enormous uptick in the importance of responsible investing (RI) from institutional investors across geographies, investor types and firm sizes.

According to Aon’s survey of nearly 230 investment professionals globally, 85 percent report responsible investing is at least somewhat important to their organization, up from 68 percent in its 2018 survey. This growth occurred across all geographic regions and institutional investor types, which include corporate pensions, public pensions, endowments and foundations, and defined contribution plans. The increase in those that believe RI is at least somewhat important, by region:

  • United Kingdom: 87 percent, up from 66 percent in 2018
  • United States: 78 percent, up from 57 percent in 2018
  • Canada: 78 percent, up from 68 percent in 2018
  • Continental Europe: 85 percent, up from 80 percent in 2018

“I am sure it comes as no surprise that responsible investing is growing in importance in regions like the UK and Continental Europe, where there’s been a marked increase in RI regulation,” said Meredith Jones, author of the report and global head of responsible investing at Aon Hewitt Investment Consulting. “However, we are also seeing significant investor-led RI efforts in areas where regulation is not driving activity. It seems institutional investors are increasingly concerned about risks associated with non-financial factors within their portfolios, and RI offers multiple ways to capture, evaluate and mitigate those risks.”

In addition to rapidly increasing interest in RI, the implementation, particularly in geographies with strengthening RI regulatory frameworks, is also expanding at a brisk pace. Globally, 44 percent of the investors polled report an RI policy is already in place, while another 24 percent have an RI policy in development--both increases from 2018’s tallies. One of the hurdles to implementation has historically been the question of how RI might impact returns, but this concern appears to be waning.

More than 40 percent of those polled believe that the incorporation of non-financial environmental, social and governance (ESG) data results in better investment performance. One third of those polled believe responsible investing is “nearing a tipping point,” an increase of nearly 10 percentage points from the 2018 survey. In addition, 64 percent of respondents allocated assets to some type of responsible investing strategy, up from 49 percent in 2018. Of those respondents, 59 percent indicated they would maintain or increase their allocations to RI in the coming year.

Despite these gains, relatively ambiguous regulatory policies in the United States may be holding investors back from RI. Forty-four percent of those polled in the United States indicated that RI plays no role in their investment decision making, compared with 29 percent in Canada, 27 percent in Continental Europe and 11 percent in the United Kingdom. Globally, the percent of respondents who do not consider RI in the manager selection process dropped from 37 percent to 29 percent.

Jones added, “The staggering increase in RI sentiment and activity we witnessed in our 2019 survey makes one thing abundantly clear: responsible investing is officially a going and growing concern. The changing regulatory framework will play a larger role in some investors’ RI endeavors, while others will adopt increasingly “mainstream” ESG integration, and still others will embrace roles as global change agents. Regardless, institutional investors seem to understand that the world will look very different in the coming years and are evolving now to meet the investment challenges that lie ahead.”

Additional key findings from the 2019 Global Perspectives on Responsible Investing report include:

  • Corporate pensions made huge gains in positive responsible investing sentiment over the last year, growing from 56 percent in 2018 to 86 percent in 2019. Public pensions saw similar growth, growing from 70 percent in 2018 to 92 percent in 2019.
  • Smaller investors are more likely to consider RI “mission critical,” (10 percent for smaller vs. 4 percent for the largest organizations), but the largest asset owners are more likely to have both a responsible investment policy and dedicated RI staff (42 percent for the largest investors vs. 24 percent for smaller investors).
  • Dedicated responsible investment staff also grew over the past 12 months in all geographic regions, with staff present in 29 percent of the investors polled, up from 20 percent in 2018.
  • Lack of agreement on key issues, such as terminology and materiality, is a hindrance for 14 percent of those polled, down from 26 percent in 2018. The industry continues to struggle with what constitutes ESG, socially responsible investing, and impact investing, which can cause confusion among even the most well-intentioned investors.
  • While Continental Europe maintained the top spot as the region respondents believe will lead responsible investing in the future, the United States dropped from the number two spot in this year’s survey to a third place. Likely due to policy gaps in the United States and regulatory advances in the United Kingdom, the latter now holds second place by a margin of 14 percentage points.
  • Institutional investors remain concerned about a variety of global issues, but climate change/natural disasters rank first (67 percent), followed by nationalism/protectionism (50 percent), and socioeconomic inequality (38 percent).

The 2019 Global Perspectives on Responsible Investing report is available here, which includes additional detail and data about actions by investor type and by geographic region.

Methodology
Aon conducted a global survey of Aon clients and institutional investors from early May 2019 through late July 2019. The survey captured the sentiments of 229 investment professionals globally who represented a range of portfolio size from less than USD $500 million to $5 billion. Smaller investor organizations are defined as less than $500 million in assets under management (AUM); mid-sized organizations as $500 million to $5 billion, and the largest organizations as $5 billion or more. Responses from the survey were analyzed and aggregated to create summary results.  

About Aon
Aon plc (NYSE: AON) is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance.

This document is intended solely to report on various investment views held by Aon Hewitt Investment Consulting ("AHIC"). The opinions, estimates, forecasts, and statements of financial market trends are subject to change without notice due to changes in the market or economic conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material has been prepared for informational purposes only and should not be considered investment, accounting, legal or tax advice. It is not intended as an offer or a solicitation with respect to the purchase or sale of a security, and it should not be interpreted as such. Aon Hewitt Investment Consulting, Inc. is a federally registered investment advisor with the U.S. Securities and Exchange Commission. AHIC is also registered with the Commodity Futures Trade Commission as a commodity pool operator and a commodity trading advisor, and is a member of the National Futures Association.

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Media Contacts:
Nadine Youssef, +1.312.381.2329 or nadine.youssef@aon.com
Erin Parro, +1.312.837.1525 or erin.parro@kemperlesnik.com

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