Perceptions are not reality for sustainable investors
September 28, 2024
In PitchBook's fifth annual Sustainable Investment Survey, we went in purposely hoping to dig deeper into motivations and practices among private market investors incorporating ESG or Impact investing.
We had a few perceptions we wanted to test, as well, as what we were seeing in the press did not line up with conversations we were having as part of our research.
We were not disappointed in the responses, as over 500 people completed the survey providing us evidence that while ESG as a practice is not dead, ESG as a term may be on shakier footing.
Most investors are probably aware of the politicization of ESG in the US, though those who think that this is only a US-based issue would be surprised to learn that a few of our non-US respondents also had some pretty negative things to say about ESG.
However, 39% of the survey respondents who said they do not incorporate ESG factors into their investment decision-making process have in fact declined to make an investment due to ESG concerns.
Thus, even respondents' perceptions about themselves don't align with reality. When people think ESG is just about values or some green hurdle, they ignore the aspects of the framework that assist in richer diligence practices.
Another perception we wanted to explore was that Impact investing equates to concessionary returns.
We've spoken to fund managers who do not want to be labeled as Impact funds because they are concerned that potential investors think that means they are being asked to accept subpar results and jump to a quick "no."
Our survey shows that 56% of our respondents who make Impact investments prioritize market-rate returns as the primary objective when evaluating investment opportunities. While concessionary return strategies do exist, when evaluating Impact funds, the assumption should not be that every such fund is concessionary.
When it comes to ESG, we asked asset managers (GPs) and allocators (LPs) if they were increasing or decreasing their focus on sustainable investment and also how they thought the other group was acting.
It was clear that most who are already practitioners of ESG or Impact investing are sticking with their approach, and some are even increasing focus.
But for many, the perception on each side, no doubt fed by news coverage, is that the other was decreasing. Things are not as they appear!
For more on how investors are navigating the global landscape, please enjoy our free report:
2024 Sustainable Investment Survey
We had a few perceptions we wanted to test, as well, as what we were seeing in the press did not line up with conversations we were having as part of our research.
We were not disappointed in the responses, as over 500 people completed the survey providing us evidence that while ESG as a practice is not dead, ESG as a term may be on shakier footing.
Most investors are probably aware of the politicization of ESG in the US, though those who think that this is only a US-based issue would be surprised to learn that a few of our non-US respondents also had some pretty negative things to say about ESG.
However, 39% of the survey respondents who said they do not incorporate ESG factors into their investment decision-making process have in fact declined to make an investment due to ESG concerns.
Thus, even respondents' perceptions about themselves don't align with reality. When people think ESG is just about values or some green hurdle, they ignore the aspects of the framework that assist in richer diligence practices.
Another perception we wanted to explore was that Impact investing equates to concessionary returns.
We've spoken to fund managers who do not want to be labeled as Impact funds because they are concerned that potential investors think that means they are being asked to accept subpar results and jump to a quick "no."
Our survey shows that 56% of our respondents who make Impact investments prioritize market-rate returns as the primary objective when evaluating investment opportunities. While concessionary return strategies do exist, when evaluating Impact funds, the assumption should not be that every such fund is concessionary.
When it comes to ESG, we asked asset managers (GPs) and allocators (LPs) if they were increasing or decreasing their focus on sustainable investment and also how they thought the other group was acting.
It was clear that most who are already practitioners of ESG or Impact investing are sticking with their approach, and some are even increasing focus.
But for many, the perception on each side, no doubt fed by news coverage, is that the other was decreasing. Things are not as they appear!
For more on how investors are navigating the global landscape, please enjoy our free report:
2024 Sustainable Investment Survey
Hilary Wiek, CFA, CAIA
Senior Strategist, Fund Strategies & Sustainable Investing
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