Around 73% of investment companies actively engage on environmental, social and governance (ESG) issues compared to 54% two years ago, according to new data from Robeco.
The survey of 300 companies accounting for $23.7trn (£18trn) in assets under management (AUM) revealed that ethical investing had increased in recent years, particularly on issues relating to climate change.
Energy is a particularly hot topic at present, with managers taking varying stances. John Mawby, fund manager at Pictet Asset Management, warned that investors have an issue when it comes to the social aspect of ESG, as plans to make the world net zero without concrete ideas of how to get there risk causing further inequality.
For this reason, Barry Norris, fund manager at Argonaut, said fossil fuels will be the trade of the next decade. “Reports of their demise have been greatly exaggerated,” he warned.
On energy, Europe was the most dynamic region, with 19% of participants completely divesting from oil and gas companies while an additional 38% said that they actively influence those companies by holding them.
On the other hand, North American contributors were more docile, with 29% saying they will continue investing in gas and oil if returns are good and a further 19% adding that they will invest in them if they perform well in a benchmark or index.
Michael Eakins, chief investment officer and group executive committee member at Phoenix Group, said: "We don’t believe in a blanket approach to all of our oil and gas holdings. Our approach is to engage with those companies, to understand how they are changing their business to be more sustainable over the long-term, to help accelerate the decarbonized economy we all want to see."
Furthermore, regional differences were highlighted by 40% of European companies committing to goals of reaching net zero emissions by 2050 compared to 11% in the US.
Lucian Peppelenbos, climate strategist at Robeco, said: "North America is behind the global average and, when asked about the reasons, investors indicated the shortage of investment strategies as the biggest obstacle."
Overall, however, the ESG trend is on the up and he said that the increased importance of these issues is a sign that sustainable investing will continue to be a crucial area moving forward.
Although the study was completed prior to the invasion of Ukraine, which could sway the data somewhat, Peppelenbos said that “there will be misalignment of supply and demand along the way, but over the long term we see it as a very strong mega trend”.
Several industry experts such as Andrew Ninian, director of stewardship and corporate governance at the Investment Association, have suggested that ESG issues will be a leading decision maker for investors in the upcoming annual general meeting (AGM) season.
Peppelenbos said: "We believe that engagement should be firm or what I call 'engagement with teeth'. It should have timelines, it should have clear requirements and there should be escalation steps where investors, if there's no progress, can escalate their falling decisions against the company, or ultimately divest.
"We have also expanded our voting policy in relation to climate in the sense that if we assess that a company is not progressing fast enough on its transition then we will vote against an increasing number of companies' directors or annual accounts."
One area of particular interest is biodiversity , with 41% of participating companies stating that it was at the centre, or a significant part of their investment strategy, up 22 percentage points from the previous survey.
Based on previous data, Robeco estimates that this number will increase to 56% within the next two years.
That shift is already underway, with Federated Hermes today launching the Biodiversity Equity fund with an investment focus on land pollution, marine pollution and exploitation, unsustainable living, climate change, unsustainable farming and deforestation.
Eleonore Bedel, global head of sustainable investment at BNP Paribas Wealth Management, said: "As distributors, we are scouting the market to find biodiversity-oriented products. We would love to have pure biodiversity products to offer our clients, but we have not found many.
“We are aware that until there are good metrics and [key performance indicators] KPIs for assessing companies correctly on biodiversity and then products that use them, there could be ‘biodiversity washing’.”