- FTSE Russell 2020 survey finds 58% of asset owners globally anticipate applying sustainability considerations to smart beta strategies, up from 44% in 2019
- EMEA still leads in sustainable smart beta interest, with North America a fast follower
- Asset owners favour re-weighting based on sustainability criteria over negative screens
- Among asset owners evaluating or implementing sustainability, there is significant interest in equity (85%), fixed income (58%) and multi-asset (31%) approaches
FTSE Russell, the global index, data and analytics provider, has published results of a survey examining the convergence of smart beta strategy and Sustainable Investment (SI); Smart Sustainability: 2020 global survey findings from asset owners.
Jaakko Kooroshy, Head of Sustainable Investment Data & Methodologies, FTSE Russell:
“Since we first started fielding questions about sustainable investment four years ago, it has attracted a great deal of interest in a short period of time and we realized that it warranted deeper analysis. In 2020, we have noted a significant uptick among asset owners worldwide interested in applying sustainability considerations to their smart beta strategies—what we call Smart Sustainability. This is reflected in our work with our clients, who are increasingly looking to integrate these parameters into smart beta indexes to underlie their portfolio strategies.”
David Harris, Group Head of Sustainable Business, London Stock Exchange Group:
“The first half of 2020, shaped by a number of factors including the COVID-19 pandemic and increased focus on social justice, is leading asset owners to re-evaluate investment strategies and priorities. Recent events have heightened investors’ focus on environmental and social factors, international cooperation and their potential impact on the financial markets. Given these large-scale shifts, combining smart beta with climate and sustainability priorities could become an even bigger trend for asset owners, as evidenced by this survey.”
A rising global trend
More than 7 in 10 asset owners globally are evaluating and implementing sustainable investment considerations in their investment strategies in 2020. Furthermore, among those using and/or evaluating smart beta strategies globally, 58% anticipate applying SI considerations to their smart beta strategy, up from 44% in 2019. Nearly half of respondents who anticipate applying these considerations to their smart beta strategies expect to increase their allocation to SI smart beta over the next year or two.
While evaluation and adoption of sustainability considerations grew for asset owners across the entire AUM spectrum, appetite was notably higher among larger asset owners. Eighty percent with AUM of USD10 billion or higher have evaluated or adopted sustainability considerations, compared to 54% in 2019.
EMEA still leads, with North America a fast follower
In 2020, the rate of sustainable investment evaluation and adoption among asset owners in EMEA (85%) remains higher than that of North America (63%).In addition, EMEA still leads the way in applying sustainability considerations to smart beta: over 80% of EMEA asset owners evaluating or using smart beta expect to apply sustainability considerations to smart beta, up from 73% last year.
However, the regional differences highlighted in 2019 are narrowing. In North America, the evaluation and implementation of sustainable investment approaches broadly within asset owner portfolios increased over 20 percentage points since last year, to 63%. Among North American asset owners evaluating or using smart beta, the percentage that expect to apply sustainability considerations to smart beta increased notably, from 17% in 2019 to 42% in 2020.
Environmental factors top the worry list with reweighting replacing negative screening
Climate risk is a ‘hot’ topic for asset owners in 2020: among those who anticipate applying sustainability to their smart beta strategy, Climate risk/Carbon tops the list of sustainability themes at 64%, with Environmental considerations close behind at 59%, while Governance and Social themes are also widely considered, both at 55%.
In addition, the most common application of SI data has shifted in favour of re-weighting. There is a notable decline in interest in negative screens, from 64% in 2019 to 48% in 2020, coinciding with a growth in the more sophisticated approach of re-weighting based on SI criteria, 55% in 2020, compared with 36% in 2019.
Growing interest across asset classes
Globally, among asset owners evaluating or implementing SI, there is significant interest in equity (85%), followed by fixed income (58%) and multi-asset (31%). Fixed income applications of sustainable investment considerations, which have historically trailed the equity market, are particularly strong in EMEA where 75% of respondents are currently implementing or evaluating sustainability considerations for this asset class, compared with 45% in North America.
The 2020 survey was conducted in January and February, with 139 global asset owners participating. The majority of participants were located in North America (37%), EMEA (37%), and Asia Pacific (21%). A wide mix of organization types are represented, including government organizations (28%), corporations or private businesses (18%), unions or industry-wide pension schemes (12%), and non-profit organizations or universities (12%). The rest is a mix of insurance companies, sovereign wealth funds, health-care organizations and family offices.
– Ends –
Media contacts
Lucie Holloway (EMEA) +44 (0)20 7797 1126
Oliver Mann (EMEA) +44 (0)20 7797 1222
Tim Benedict (Americas) +1 917 582 0641
Jelena Nedelka (Americas) +1 929 228 6987
Sophie Mou (Asia Pacific) +852 2164 3267
newsroom@lseg.com
About FTSE Russell
FTSE Russell is a global index leader that provides innovative benchmarking, analytics and data solutions for investors worldwide. FTSE Russell calculates thousands of indexes that measure and benchmark markets and asset classes in more than 70 countries, covering 98% of the investable market globally.
FTSE Russell index expertise and products are used extensively by institutional and retail investors globally. Approximately $16 trillion is currently benchmarked to FTSE Russell indexes. For over 30 years, leading asset owners, asset managers, ETF providers and investment banks have chosen FTSE Russell indexes to benchmark their investment performance and create ETFs, structured products and index-based derivatives.
A core set of universal principles guides FTSE Russell index design and management: a transparent rules-based methodology is informed by independent committees of leading market participants. FTSE Russell is focused on applying the highest industry standards in index design and governance and embraces the IOSCO Principles. FTSE Russell is also focused on index innovation and customer partnerships as it seeks to enhance the breadth, depth and reach of its offering.
FTSE Russell is wholly owned by London Stock Exchange Group.
For more information, visit FTSE-Russell site.
© 2020 London Stock Exchange Group plc and its applicable group undertakings (the “LSE Group”). The LSE Group includes (1) FTSE International Limited (“FTSE”), (2) Frank Russell Company (“Russell”), (3) FTSE Global Debt Capital Markets Inc. and FTSE Global Debt Capital Markets Limited (together, “FTSE Canada”), (4) FTSE Fixed Income Europe Limited (“FTSE FI Europe”), (5) FTSE Fixed Income LLC (“FTSE FI”), (6) The Yield Book Inc (“YB”) and (7) Beyond Ratings S.A.S. (“BR”). All rights reserved.
FTSE Russell® is a trading name of FTSE, Russell, FTSE Canada, FTSE FI, FTSE FI Europe, YB and BR. “FTSE®”, “Russell®”, “FTSE Russell®”, “FTSE4Good®”, “ICB®”, “The Yield Book®”, “Beyond Ratings®” and all other trademarks and service marks used herein (whether registered or unregistered) are trademarks and/or service marks owned or licensed by the applicable member of the LSE Group or their respective licensors and are owned, or used under licence, by FTSE, Russell, FTSE Canada, FTSE FI, FTSE FI Europe, YB or BR. FTSE International Limited is authorised and regulated by the Financial Conduct Authority as a benchmark administrator.
All information is provided for information purposes only. All information and data contained in this publication is obtained by the LSE Group, from sources believed by it to be accurate and reliable. Because of the possibility of human and mechanical error as well as other factors, however, such information and data is provided "as is" without warranty of any kind. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the accuracy, timeliness, completeness, merchantability of any information or of results to be obtained from the use of FTSE Russell products, including but not limited to indexes, data and analytics, or the fitness or suitability of the FTSE Russell products for any particular purpose to which they might be put. Any representation of historical data accessible through FTSE Russell products is provided for information purposes only and is not a reliable indicator of future performance.
No responsibility or liability can be accepted by any member of the LSE Group nor their respective directors, officers, employees, partners or licensors for (a) any loss or damage in whole or in part caused by, resulting from, or relating to any error (negligent or otherwise) or other circumstance involved in procuring, collecting, compiling, interpreting, analysing, editing, transcribing, transmitting, communicating or delivering any such information or data or from use of this document or links to this document or (b) any direct, indirect, special, consequential or incidental damages whatsoever, even if any member of the LSE Group is advised in advance of the possibility of such damages, resulting from the use of, or inability to use, such information.
No member of the LSE Group nor their respective directors, officers, employees, partners or licensors provide investment advice and nothing in this document should be taken as constituting financial or investment advice. No member of the LSE Group nor their respective directors, officers, employees, partners or licensors make any representation regarding the advisability of investing in any asset or whether such investment creates any legal or compliance risks for the investor. A decision to invest in any such asset should not be made in reliance on any information herein. Indexes cannot be invested in directly. Inclusion of an asset in an index is not a recommendation to buy, sell or hold that asset nor confirmation that any particular investor may lawfully buy, sell or hold the asset or an index containing the asset. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.
Past performance is no guarantee of future results. Charts and graphs are provided for illustrative purposes only. Index returns shown may not represent the results of the actual trading of investable assets. Certain returns shown may reflect back-tested performance. All performance presented prior to the index inception date is back-tested performance. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index was officially launched. However, back-tested data may reflect the application of the index methodology with the benefit of hindsight, and the historic calculations of an index may change from month to month based on revisions to the underlying economic data used in the calculation of the index.
This document may contain forward-looking assessments. These are based upon a number of assumptions concerning future conditions that ultimately may prove to be inaccurate. Such forward-looking assessments are subject to risks and uncertainties and may be affected by various factors that may cause actual results to differ materially. No member of the LSE Group nor their licensors assume any duty to and do not undertake to update forward-looking assessments.
No part of this information may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission of the applicable member of the LSE Group. Use and distribution of the LSE Group data requires a licence from FTSE, Russell, FTSE Canada, FTSE FI, FTSE FI Europe, YB, BR and/or their respective licensors.