More than three-quarters of limited partner (LP) respondents to a survey from LGT Capital Partners and Mercer said they incorporated ESG (economic, social and governance) criteria when assessing investments in alternative asset classes.
In addition, some 57 percent said they believed that embracing ESG criteria had a positive impact on risk-adjusted returns, while just 9 percent were of the view that it lowered them.
The survey also discovered that this is a relatively recent phenomenon, with more than half (54 percent) of investors which take into account ESG criteria having done so for three years or less.
In a statement, Tycho Sneyers, managing partner and chairman of LGT Capital Partners’ ESG committee, said the survey showed that “ESG analysis has moved beyond ethical concerns and has firmly found its place as a risk and investment management topic”.
But the survey found that ESG prioritisation was a little lower when it came to infrastructure funds relative to other asset classes. While 22 percent of LPs said ESG was a “significant” factor in infrastructure manager selection, the equivalent figure was 27 percent for real estate and 33 percent for private equity (although just 7 percent for hedge funds).
Across asset classes, the most important environmental issue was considered to be climate change, just ahead of water scarcity. The most important social theme was human rights and the most vital governance issue was bribery and corruption.
Titled “Global Insights on ESG in Alternative Investing”, the research canvassed 97 institutional investors in 22 countries.
With more than 20,000 employees in 42 countries, Mercer focuses on talent, health, retirement and investments. LGT Capital Partners is an alternative investment specialist headquartered in Switzerland with $50 billion in assets under management and more than 400 institutional clients.