Sustainable investment trends across Europe
Joanne Holden, Global Head of Investment Research
We believe that asset allocation is one of the most important decisions an investor makes. A thorough assessment of risks is critical to constructing a portfolio that will seek to meet your objectives whilst managing risks and opportunities that may arise. The COVID-19 pandemic has introduced additional challenges as investors wrestled heightened market volatility and the economic impact of the pandemic throughout 2020. Even one year later, uncertainty over the future path of the pandemic and whether vaccine-driven reopening can be sustained remains.
Many countries have made significant strides along the journey toward economic recovery as vaccine roll-out across the UK and Europe has mitigated the impact of COVID-19 which led most countries to fully reopen; however, regardless of the circumstances in your country, it is always a good time to review your allocations in light in light of shifting economic and market backdrops. Mercer’s European Asset Allocation Insights 2021 includes a highly relevant report focused on Sustainable Investment and identifies emerging trends in the behaviour of c. 850 institutional investors across 11 countries, reflecting total assets of c. €1 trillion including key findings specific to Norway.
The vast majority of investors have firmly embedded ESG considerations in their investment process, a trend that has strengthened further during the COVID‑19 crisis.
When asked to rate the importance of environmental, social and governance considerations, respondents in all countries except for Ireland responded that the environment was considered the most important area of focus.
Climate change and governance are established areas of fiduciary scrutiny. A significant minority of respondents are looking to further expand the scope of their sustainability activities to social issues, other environmental issues (for example biodiversity) and diversity, equity and inclusion.
Stewardship is mainly thought of in relationship to equity mandates, however, increasingly it is applied across the board, to both fixed income and alternatives portfolios.
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