Of the European pension fund managers responding to a survey from ESG intelligence firm Deepki, 52% say they are changing or adjusting their investment strategy to improve their ESG focus.
The survey, which was conducted with 250 managers in the UK, Germany, France, Spain, and Italy, also found that 46% of those European pension funds have 21%-25% of their fund allocated to domestic commercial real estate. A further 24% have a 16%-20% allocation.
But Deepki said the sector still needs to improve if funds are to rely on domestic commercial real estate as part of an ESG survey. It said that 18% of pension fund managers rated their domestic commercial real estate sector’s ESG performance as very good, and 57% as ‘quite good’ over the past three years, leaving room for improvement.
Vincent Bryant, CEO and co-founder of Deepki, said: “Pension funds are extremely influential when it comes to improving ESG performance of different assets. Our findings show that commercial real estate is no different and that they are proactively taking steps to improve compliance of their funds. Measuring performance and developing strategies to ensure they meet the 2050 net zero target has never been important for the sector.”
ESG is always a popular topic on these pages and in pretty much every sector of investment. The California Gold Rush in 1848 brought hundreds of thousands of people to the western United States. It seems this Green Rush is pulling in money from all over planet.
On bond issuance, PWC Luxembourg said back in May that the market for such vehicles could mushroom to reach between €1.4tn and €1.6tn by 2026.
But while the money is flowing in, it is still hard to measure how green it is. In August last year, I wrote on how multiple people with better knowledge than I on this subject (and, indeed, many other subjects) had begun to raise the alarm.
Then, in the Financial Times, commentator Robert Armstrong jumped straight to the point with an article called ‘The ESG Investing Industry is Dangerous’.
Armstrong’s piece quoted widely from Tariq Fancy’s ‘The Diary of a Sustainable Investor’, which is available both on Medium and as a PDF on Dropbox. Fancy is the former chief investment officer for sustainable investing at Blackrock who has now turned against much of what he used to work in. His article is an excellent read; the TLDR version of it is that there is not a bridge in his former company that Fancy has not decided to burn to the ground. With a flamethrower. And then stamped on its ashes and insulted its mother for good measure.
Since then, even firms with a vested interest have sounded the alarm. May saw research from Ninety One that said the industry was too reliant on ESG ratings.
It said in a statement back then: “Ratings cannot provide a full view into how a company manages its externalities both positive and negative. Externalities such as a company’s impact on the environment (natural capital), interaction with the societies it operates in (social capital) and the potential of employees (human capital) will increasingly influence valuations. Without this understanding, investors are overlooking companies that are making the right sustainable choices.”