Survey Reveals Attitudes Toward ESG From Investors and Their Advisors

Has the pandemic changed attitudes among investors and their advisors toward Environmental, Social and Governance (ESG) issues? Not significantly, according to a recent Pitchbook survey. When asked if their focus on sustainability has changed in 2020, only 6% of the general and limited partners surveyed felt that interest in ESG had “decreased temporarily due to the COVID-19 crisis.”

The survey, which was conducted July 7-August 7, 2020, covered much of the same territory as a similar 2016 survey, shedding some light on how opinions may have changed over the past four years.

Here is our take on a few of the highlights of the Pitchbook summary report.

Drivers of sustainable investing programs

According to the Pitchbook survey report, which was sponsored by 500 startups, “Many respondents felt they could improve their long-term results by focusing on risks beyond those typically found in financial statements. If industry participants feel they can improve their risk-adjusted returns, they will be much more likely to stick with a sustainable investing approach rather than considering it a “nice to have” that can be set aside when other concerns arise.”

The five biggest drivers of sustainable investing were:

• Environmental and/or social concerns
• Improved long-term investment results
• Diversity & inclusion
• Risk management
• Brand or reputational risk

Biggest sustainable investment challenges

It’s a common concern: Survey respondents noted that defining and measuring the impact of ESG outcomes is one of the biggest challenges facing investors. They also listed as challenges a lack of robust data on ESG factors for private equity companies as well as perceptions of potential negative impact on overall returns.

Despite the growing sentiment regarding the importance of sustainable investing, the survey results indicated that there are still challenges with convincing a broader population of the long-term returns and value generation.

Change in industry focus on sustainability in 2020

The COVID-19 pandemic came up a few different ways. When asked if their focus on sustainability has changed in 2020, only 6% of GPs and LPs felt it had “decreased temporarily due to the COVID-19 crisis.” Some industry participants may have put sustainable investing initiatives on the back burner, but it appears that COVID-19 has potentially increased the urgency for others to consider the social construct around their investments.

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© 2020