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Foundations Lacklustre on ESG Commitment from Managers  

Over 80% of endowments and foundations globally have implemented carbon-related targets but only 32% would be “unlikely” to hire an external equity manager who has not made a net zero commitment, according to a new survey from consultancy bfinance. Similarly, 92% indicated that they do “active engagement/stewardship” in equities, but only 47% would be “unlikely to hire” an equity manager who cannot demonstrate specific outcomes for engagement. The survey, covering 61 asset owners from 16 countries also found that 80% of respondents say ESG considerations are ‘very’ or ‘moderately’ important to their investment strategy and implementation. Ninety-seven percent of equity investors integrate ESG into the investment process in this asset class, followed by fixed income (79%), private markets excluding real estate (58%), private real estate (48%), and hedge funds (15%). A “significant proportion” of survey respondents invest in explicitly impactful strategies, particularly in private markets. Within this cohort, 38% are willing to accept a somewhat lower financial return for an impact investment. These investors are generally seeking both social and environmental impact (55% indicate that they’re equally interested in both), though a minority of respondents primarily look for one or the other. Kathryn Saklatvala, Head of Investment Content at bfinance and lead author of the report, said: “This investor community has long been recognised for its ability to foster innovation and creativity, thanks in part to liability profiles and lighter regulatory constraints than we often find in the pension and insurance sectors. US endowments’ historic activity in illiquid investments is one often-noted example of this effect. More recently, we have seen this group developing some of the most interesting and forward-thinking impact and climate-oriented investment programmes that we’ve yet seen. As such, the third section of this three-part study focuses on ESG and impact investing.” 

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