European asset managers are predicting new approach to investing from governments, corporations and individuals in the wake of the COVID-19 pandemic.
The continent has been hit hard by the virus, with countries imposing strict lockdowns since the start of the year and only just starting to lift measures.
Socially responsible investing (SRI) – incorporating environmental, social and governance themes – is becoming a more important issue for investors, according to a new survey by France’s BNP Paribas Asset Management (BNPP AM).
The poll of 129 investors across the UK, France, Germany, Italy, the UK, the Netherlands and Scandinavia found that almost a quarter (23%) felt SRI themes were more important as a result of the COVID-19 crisis.
Social considerations were particularly important in the current environment, respondents said, with 70% expecting these to be “extremely important” or “very important” in the near term.
“The COVID-19 crisis has clearly prompted a shift in investor perception of social factors, which are now widely seen as having a critical and positive impact on long-term value creation and risk mitigation,” said Frédéric Janbon, CEO of BNPP AM.
“It has also highlighted the interconnection between the way in which companies approach social issues such as treatment of employees or addressing inequalities in their long-term sustainability strategy.”
BNPP AM this week unveiled a long/short absolute return fund for European investors that uses SRI data to decide upon long and short positions.
Meanwhile, Dutch asset manager NN Investment Partners (NN IP) has forecast that “non-financial parameters” will play an increasingly important role in investment and regulation as corporate and political leaders develop a new “social contract” post-pandemic.
Adrie Heinsbroek, responsible investment leader at NN IP, said investors and asset managers needed to “assess how they should act upon these unknowns and be aware of how flexible they need to be if they are to adapt and tap into these corona-led trends”.
Heinsbroek added: “One aspect that has become clear is that effectively assessing value involves taking a broader perspective, looking beyond financial factors. This will become an increasingly dominant trend in how we measure both economic and societal progress, and as investors we have the means to positively influence it.”
The European Union has been working for many years on various measures and regulations to encourage more SRI approaches among asset managers and investors.
In May, the European Commission – the executive branch of the EU – proposed a ‘Next Generation EU’ budget, with a ‘European Green Deal’ at its heart.
Europe’s approach contrasts with the recent policy direction in the US. The Securities and Exchange Commission has moved to discourage investors from combining environmental, social and governance into a single ESG score, while the Department of Labor recently published draft rules designed to restrict fiduciaries from considering non-financial factors in their investment strategies.