Individual Asset Performance Factors Studied

A news release from Mercer Investment Consulting said that 65% believe the effects of globalization significantly impact asset performance, while a similar proportion (62%) think corporate governance is a relevant issue. Environmental issues like climate change feature less prominently now (15%) but are forecast to grow in consideration within five years.

Survey results indicate that the environmental, social and corporate governance (ESG) issues considered most relevant to performance at the individual asset level – corporate governance and globalization – are not expected to be primary drivers of overall capital markets. Instead, interest rates and corporate profits are forecasted to have the greatest impact. Oil prices are also expected to play a role in every region’s capital markets.

“The environmental and social effects of globalization are being experienced by governments, local communities and businesses across all regions, as pressures on resources grow,” asserted Jane Ambachtsheer, Global Head of Mercer IC’s Responsible Investment business, in the news release. “Similarly, corporate scandals have hit the headlines in almost all regions, so it is not surprising that these two issues are viewed as the most important responsible investment factors by investment managers.”

According to the survey, over the next five years, environmental issues overall (climate change, environmental management and access to clean water) are expected to have a larger impact on asset performance, and in many regions environmental management is likely to become one of the top three issues affecting asset performance.

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This year, 13% of investment managers anticipate increased client demand for specialist investment strategies built on environmental, social and corporate governance (ESG) analysis. This expectation is greatest in Europe where 39% of managers predict growing demand, followed by the UK and Canada. Singapore is the only place where demand is not anticipated to grow.

Looking forward, expectations rise dramatically, with 31% of managers globally expecting to see more requests for specialist products built on ESG analysis. US managers remain least convinced, with just 19% expecting that such demand will materialize.

The survey reflects the views of 157 investment management firms from around the world, which manage aggregate assets in excess of $20 trillion. Respondents were asked how significant environmental, social and corporate governance (ESG) issues were to investment performance, and what expectations of future client demand are for related investment services.