Federated Hermes, Inc. ESG survey reveals heightened importance of issues besides the environment in the wake of social unrest and global pandemic

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– Investors attach general importance to corporate governance (88%) and the consideration of stakeholders by companies (86%).

Posted: October 21, 2021 at 4:16 p.m. MDT|Update: 52 minutes ago

PITTSBURGH, 21 October 2021 / PRNewswire / – Federated Hermes, Inc. (NYSE: FHI), a global leader in active and responsible investing, today announced the results of its 2021 Environmental, Social and Governance (ESG) survey of American financial advisers, high-net- individuals and institutional investors.

The Federated Hermes survey on ESG investments 2021 underlines the continued importance of ESG initiatives as 95% of financial advisers said their clients asked them about ESG or responsible investing, up from 90% in 2020.

“ESG is increasingly important to investment professionals as their clients, boards of directors and investment committees demand more information and options. At the same time, institutional investors continue to focus on aligning ESG with their organizational values, ”said Anne Kruczek, head of the Responsible Investment Office. “Evolving investor perspectives underscore the continued importance of monitoring ESG considerations and their potential impact on investment opportunities and risks.

Main conclusions:

  • The events of the past 18 months have raised social and governance questions: Perceptions of investment risk in addition to environmental factors accelerated between the 2020 survey and the 2021 survey, suggesting the importance of continuously assessing the changing roles of environmental, social and governance factors in the framework for informed active management discussions between dispatchers, advisors and their clients. Thinking about the coronavirus pandemic and the market environment of the past 18 months, respondents give general importance to corporate governance (88%) and the consideration by companies of stakeholders (86 %). The importance versus investment risk of social factors is higher among advisers and institutions, followed by high net worth individuals, with 74% of all respondents noting a perceived increase in the importance of diversity, equity and inclusion over the past year. Respondents also indicated a perceived increase in governance topics, including privacy and data security, which, at 78%, was the top growing concern of investors, followed by supply chain resilience (71 %).
  • Active management of the gain on liabilities for ESG investment: Investment distributors have indicated a strong preference for active management over passive approaches when reviewing ESG investments. Institutional investors report a decrease in passive ESG investments, from 22% in 2020 to 16% in 2021, while 48% of advisers said they use actively managed investments, up from 31% in 2020. Among high net worth individuals, 39% are using different types of active ESG investments, and their use of liabilities increased from 37% in 2020 to 22% in 2021.
  • The integration of ESG is progressing, even if some continue to catch up: More than six in ten advisors (61%) said they included ESG considerations when recommending investments for their clients’ portfolios last year, up from 46% in 2020. Meanwhile, although 45% of institutions have increased the integration of ESG considerations into their investment process over the past year, more than half (52%) indicated that the level has remained the same. Many institutions continue to integrate ESG into their investment process as well as into their investment policy statements and engage their managers on the use of ESG factors in investment portfolios, although some report that the The process of educating their boards of directors and investment committees can be a lengthy process.

“With just over a third of institutions and advisers having implemented an integrated ESG strategy in their investment process, almost half of those surveyed said they were considering doing so,” said Marie Green, client portfolio manager for ESG. “We know that investment distributors are becoming more and more sophisticated when it comes to ESG investing in equities and we believe that as ESG investing becomes a fundamental investment, asset distributors will seek fixed income options for their portfolios ”.

About the survey

Federated Hermes, Inc. interviewed 404 U.S. investment distributors, including 202 financial advisers and wealth management professionals, 102 institutional investors and 100 high net worth individuals. The annual survey was conducted online between June 7, 2021 and July 16, 2021.

Institutional investors are defined as owners of institutional assets with more than $ 500 million in assets under management, including foundations, endowments, public defined benefit plans, company defined benefit plans and general insurance accounts; the financial advisers and wealth managers interviewed have client assets under management (advice) of more than $ 25 million, including registered investment advisers (RIAs), brokers, banking advisers and insurance affiliates, as well as consultants; and high net worth individuals have assets to invest (excluding main residence) of more than $ 1 million.

About Hermès Federated

Federated Hermes, Inc. is a leading global investment manager with $ 645.8 billion in assets under management at June 30, 2021. Guided by our conviction that responsible investing is the best way to create long-term wealth, our investment solutions cover equity, bond, alternative / private markets, multi-asset and liquidity management strategies. Providing world-class active investment and engagement management services to over 11,000 institutions and intermediaries, our clients include corporations, government entities, insurance companies, foundations and endowments, banks and brokers / traders. Based at Pittsburgh, nearly 2,000 Federated Hermes employees are London, new York, Boston and offices around the world. For more information visit FederatedHermes.com.

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SOURCE Federated Hermes, Inc.

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