New research, commissioned by SimCorp and Deloitte, and conducted by Institutional Investor, “Global Pension Investment Trends” reveals that nearly three out of five global pension funds (58%) expect to increase their ESG portfolio exposure by 20% or more, while more than three out of four (78%) say they struggle to achieve a holistic view of ESG and other investments across all asset classes.
The study makes clear that large pension funds across the world are encountering several challenges and opportunities from mounting ESG pressures, shifting industry standards and stakeholder concerns, and vast increases in data needs. It also confirms that achieving a holistic portfolio overview that includes ESG, private markets, and other investments across all asset classes, is a top priority for most pensions.
Christian Kromann, Chief Executive Officer at SimCorp, commented: “Having a holistic view of their total portfolio is a starting point for pension funds to react quickly to market changes to both protect their portfolios and seize opportunities – not being constrained by the need to retrieve data from disparate legacy systems.”
The report explores four key themes that have emerged from the survey findings:
- Pensions seek to retain internal control of their asset management while outsourcing their “non-core” IT, data management and operational needs.
- Pension managers are adapting to increasing ESG commitments, and the challenges and opportunities they bring.
- Investment decision makers have growing interest in private market investments but are hindered by operational challenges.
- Pensions often struggle with data management limitations and in response they’re making technology upgrades a top priority.
Hilde Jenssen, Head of Fundamental Equities at Nordea Asset Management, commenting on the survey findings, said: “…we think the key challenge for investors will be data availability to comply with EU regulatory framework. At the same time, as active fundamental equity investors, we are constantly looking for companies that are mispriced for various reasons. ESG data may be one of these reasons and hence create investment opportunities. In the long term, scalability of the ESG investment process may be a key challenge.”
Sonya Sawtell-Rickson, Chief Investment Officer at HESTA, a $66 billion pension in Australia, commented: “We believe demand for ESG exposures is likely to continue to rise, as investors seek to move away from the narrow shareholder primacy framework toward a more holistic lens on stakeholders and their social license to operate. We continue to increase our exposure to responsible investments, and also lift our responsible investment ambitions.”
The report is based on a survey of more than 135 investment, operations, and technology decision makers at public and private pensions across North America, Europe, and Asia-Pacific with $10 billion or more assets under management and explores the key issues pension funds are facing today.
For more information and to read the full report, see here.