Investors Want More Information From Firms On ESG – Nuveen

Amanda Cheesley Deputy Editor February 7, 2023

Investors Want More Information From Firms On ESG – Nuveen

Nuveen, the investment manager of TIAA, has recently released its 7th Responsible Investing Survey, tracking US investors’ attitudes and behaviors regarding responsible investing. 

A new survey by Nuveen shows that three-quarters of US investors believe that ESG factors should always be part of the investing process.

According to the survey, more than 80 per cent of US investors also think that companies need to be more open in communicating the risks and opportunities that shape their standing as “responsible investments.”

Seventy-three per cent said they are more likely to invest in a company that shares its plans with investors for effectively managing those factors.

Investors’ demand for more ESG-related information from companies is paired with strong agreement that ESG investing now represents a core portfolio approach, the firm continued.

Nearly eight out of 10 respondents see responsible investing as a framework that incorporates material factors not typically accounted for in traditional financial analysis. Four in five agree that investors should view responsible investing as a long-term strategy – and 76 per cent say that factoring in RI risks and opportunities should always be part of the investment process.

Younger investors are particularly in tune with the fundamental value of responsible investing:  92 per cent of Gen Z and Millennial investors agree that related risks and opportunities always belong in the investment process, compared with just 68 per cent of Gen X’ers and Baby Boomers, the firm said.

The survey, which was conducted by The Harris Poll on behalf of Nuveen, covered 1,003 adults aged 21 and over with at least $100,000 in investible assets between July and August 2022. It includes 573 investors who said they currently own funds managed according to principles of responsible investing – also known as ESG investing.

“Although many investors are interested in RI’s positive impact on society, in their minds the process of managing key ESG factors should also focus squarely on mitigating critical impediments to company performance,” said Amy O’Brien, global head of responsible investing.

According to the firm, about seven in 10 investors agree that having RI options in their retirement plan makes them feel good about working for their employer.  The sentiment is even stronger among Gen Z and Millennial investors: 95 per cent would feel good, compared with just 56 per cent of Gen X’ers and Baby Boomers.

“Responsible investing options are becoming a ‘must-have’ for corporate retirement plans, driven by strong participant interest in aligning investments with their values while tracking toward long-term financial goals,” said O’Brien. 

“Retirement plan sponsors who introduce RI options and offer education about the portfolio advantages clearly have an opportunity to build even greater appreciation and loyalty especially among employees who are early on in their careers,” she continued.

Climate change
Climate change also looms large among the risks and opportunities on the minds of investors.

Two-thirds of investors agree that recent climate-related natural disasters have made them more interested in RI. The same percentage agree that responsible investing can lessen the impact of business risks associated with climate change.

As a result of their concern about climate risk, 61 per cent of investors have taken some action, including 31 per cent who have talked to their advisor or another financial professional about low carbon investments and the green energy transition, the firm added.

“When it comes to climate risk, investors clearly see a connection between the problem and practical investment solutions, with most indicating they find it appealing to have the opportunity to invest in companies that aren’t heavily responsible for climate-altering carbon emissions,” said O’Brien.

A majority of investors would be interested in shifting to an investment strategy that owns only companies with net-zero carbon emissions; 62 per cent agree that knowing the total carbon emissions generated by their investments would help them make more RI choices.

Nuveen said it is addressing investor interest in net-zero carbon approaches with, among other products, its recently-launched Global Net Zero Transition ETF (NASDAQ: NTZG).  

The fund offers investors a way to invest in companies that have committed to carbon-reduction plans or provide technology that significantly supports climate mitigation, as well as high carbon emitters where reduction will contribute meaningfully to real-world emissions' decline. Nuveen is also working to strengthen transparency regarding ESG factors among its portfolio companies and to improve the level and consistency of ESG disclosure industrywide through regulation, the firm continued.

Environmental risks aren‘t the only ESG factor drawing concerted investor focus: About six in 10 agree that the social unrest of the past two years has made them more interested in the “S” in ESG investments and 69 per cent agree that companies should put even greater focus on addressing the “S.”

“Investors recognize that a company’s management of its key ESG factors doesn’t only determine whether it qualifies as a ‘responsible investment’ – but also plays a consequential role in driving the company’s performance and prospects,” said O’Brien. “It’s clear that investors have come to view RI as a sound strategy for generating portfolio value,” she added.

Illustrating the increasing focus on ESG management as a performance driver, nearly half of investors cite “better performance/proof of performance” as reasons why they currently own or would own funds managed according to RI principles, the firm concluded.

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