Data snapshot: Sustainability funds to feel investor tailwinds

Alongside infrastructure and private credit, sustainability is a theme large asset owners are ready to get behind, according to a survey by Mercer Investments.

Further evidence has emerged that sustainability-themed funds will find growing favour among institutional investors. Half of large asset owners – defined here as those with $5 billion or more – plan to increase their exposure to “ESG/sustainability” strategies, according to a survey conducted by Mercer Investments. This places sustainability alongside infrastructure and, to a lesser extent, private credit as investment areas set to experience the greatest swell in LP demand.

Mercer gathered views from 61 “large asset owners” with collective assets of more than $2 trillion. It defines these as institutions like pensions, insurers, not-for-profits, wealth managers and sovereign wealth funds. The survey data was gathered between May and July last year.

Max Messervy, Americas head of sustainable investment for Mercer, attributed the perceived demand to two things: the first being an “ultra-long term” investor view that sustainability considerations will shape financial markets “over multiple decades”. The other is that sustainability issues are currently viewed by investors as financially material; “materiality trumps politics”.

“At a time when much ink has been spilled over whether we are witnessing a so-called ESG backlash, it is notable that some of the world’s largest asset owners are intending to increase their allocations to sustainability strategies,” Messervy wrote in the report.

The report also noted that climate change is now addressed in some way in nearly all (87 percent) of investors’ policies or documents. Biodiversity, meanwhile, is referenced by only 16 percent.