Attitudes to ESG differ considerably between investors in EMEA and Australia and those in the US, a survey of its clients by JPMorgan Asset Management has found.
The survey asked how important ESG considerations were to investors in their decision-making processes, and found that more than half of Australian investors (63 percent) said that ESG was in their top 10 considerations, while 25 percent said it was in their top three.
In the EMEA region, 46 percent of investors said ESG was in their top three considerations while 44 percent said it was in their top 10.
The US was a notable laggard, with just 11 percent of investors citing ESG factors as among their top three considerations and less than half (49 percent) stating it was among their top 10 considerations. A further 39 percent said they did not consider ESG at all.
Speaking at a virtual media briefing this week to present the survey results, JPMorgan Asset Management Australia chief executive Rachel Farrell said: “Frankly, I find this somewhat shocking.
“If you take, for example, [carbon] transition, a critical ESG issue, 65 percent of the world’s economy has announced plans to decarbonise by 2050, or in the case of China, by 2060. So, to not consider carbon transition is just poor risk management. Whether you believe in climate change or not, if most of the world’s economy is in transition, it’s clearly going to impact asset prices.”
Farrell said Australian investors would continue to take ESG seriously because the country’s economy was still reliant on fossil fuels and there is not currently enough public investment to finance the transition to net-zero emissions.
“This will mean that investors here will have to carefully navigate investments in the domestic market, which will support the trend towards increasing global allocations. You will also see more Australian investors build allocations towards sustainable investment products and strategies, and they’ll look to asset managers, we believe, to improve disclosure on ESG metrics,” she said.
JPMorgan AM is building its own proprietary ESG scores to meet that need, said Farrell.
‘Alternatives now mainstream’
The survey also assessed investor attitudes in Australia and New Zealand to investing in alternative assets.
It found that almost a third of investors (28 percent) allocated to alternatives specifically because of the diversification benefits they provide, while 52 percent said they allocated because of a combination of diversification, alpha and income.
“From the conversations I’m having with clients, it’s clear that the reduction in bond [returns] is being redirected into alternative investments. We can see that the traditional role of bonds, which is providing income and diversification, is increasingly being sought from alternative allocations,” Farrell said.
“Alternatives have definitely now gone mainstream and the survey results back that up, with over 80 percent of our respondents in Australia including alternatives in their investments.”
The survey canvassed 192 investors from Australia and New Zealand during a series of JPMorgan AM’s virtual client events, as part of a larger survey of 2,300 investors globally conducted between November 2020 and January 2021. Respondents included investment professionals from superannuation funds, pensions, investment consultants, family offices, insurers, sovereign wealth funds and financial advisors.