Asset owners in the Europe, Middle East and Africa region have the highest interest in applying sustainability considerations to their smart beta strategies, according to an FTSE Russell 2020 survey. And right on its heels are North American asset owners.
Eighty-five percent of EMEA asset owners and 63% of North American asset owners evaluated and adopted sustainable smart beta this year.
“Recent events have heightened investors’ focus on environmental and social factors, international cooperation and their potential impact on the financial markets," said David Harris, the group head of sustainable business at the London Stock Exchange Group, the owner of the FTSE Russell. "Given these large-scale shifts, combining smart beta with climate and sustainability priorities could become an even bigger trend for asset owners."
The FTSE 2020 survey took place in January and February 2020 with 139 asset owners across the globe. Asset owners included corporations, unions, industry-wide pensions plans, government organizations and nonprofits. A little over a third (37%) were located in North America, the same amount in EMEA, and 21% were in Asia Pacific.
In 2019, North American implementation of sustainable investment strategies was at 43%. By 2020, it rose to 63%. The asset owners that expect to use it this year has also increased from 17% in 2019 to 42% in 2020.
The sustainability interests are mainly showing up in equities. More than eight in 10 (85%) asset owners are using stocks while 58% are looking to fixed income and 31% are incorporating multiasset. Comparatively, 45% of North American asset owners are analyzing sustainable smart beta in fixed income products.
Another trend that emerged is the appeal of reweighting over negative screening. Reweighting was used by 36% of survey respondents in 2019. This year, the FTSE 2020 survey saw an uptick to 55%. Simultaneously, the negative screening suffered a loss of interest. What was popular among 64% of asset owners in 2019 has reduced to 48% in 2020.