Sovereign asset managers focus on ESG in the aftermath of COVID-19 – Invesco

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LONDON, July 12 (Reuters) – Around a third of central banks and sovereign wealth funds have focused on environmental, social and governance issues over the past year as the COVID-19 pandemic has highlighted issues ranging from carbon emissions to inequalities, according to Invesco. survey found.

In total, 63% of central banks responding to the survey believed that tackling climate change was within their mandate, with almost half believing that mitigating the consequences of climate change should be a monetary policy objective.

In the latest move by a major central bank to cut carbon emissions, the European Central Bank said last week it would take climate change more account in its fundamental policy decisions. Read more

More than half of central banks and sovereign wealth funds responding to the Invesco Global Sovereign Asset Management study said they have specific ESG policies, compared to 44% in the 2019 survey.

The asset manager interviewed 141 investment managers from a mix of sovereign wealth funds and central banks, managing around $ 19 trillion in total assets on topics ranging from ESG to China and liquidity.

The pandemic has accelerated underlying issues with ESG, as disruptions in economic activity have reduced carbon emissions, while the health crisis and rising unemployment have highlighted inequalities.

“The pandemic has definitely accelerated the ESG concentration,” said Rod Ringrow, head of official institutions for Invesco.

“What we are seeing is greater social awareness and the need to integrate it now as a matter of course and the pandemic may have been the catalyst for this ‘build back better’ approach.”

More and more central banks are also keen to consider climate when investing, with 64% of respondents agreeing that green bonds were a desirable currency reserve investment.

The People’s Bank of China said it has increased the share of green bonds in its foreign exchange reserve investments while controlling investments in highly polluting assets.

Sovereign wealth funds also strive to seek sustainable investment opportunities.

The survey showed that 52% of SWFs surveyed said improving yields was their current motivation for adopting ESG policy, slightly more than the number who cited reduced risk as the main driver.

And 57% of responding SWFs said the market had not fully considered the long-term implications of climate change, offering opportunities for higher returns.

Reporting by Tom Arnold; Editing by Hugh Lawson

Our Standards: Thomson Reuters Trust Principles.


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