Investors are increasingly looking at sustainable indices for ethical investment products and performance measurement, an industry panel has said.
The UK Sustainable Investment Forum said experts were anticipating growing demand for investments achieving environmental, social and financial value in areas including Exchange Traded Funds.
In the second of its Future of Investment reports the UKSIF convened an industry panel to discuss the trends and developments in sustainable investment.
Penny Shephard, chief executive of UKSIF, said: “Institutional and high net worth investors are increasingly looking at sustainable indexes for both products and performance measurement.”
The report said there were challenges presented to data quality, transparency and standards but these were being addressed by firms taking a lead on developing new approaches to research and advice.
Will Oulton of Mercer consulting said one of the challenges for the industry was integrating environmental, social and governance (ESG) data into the investment process.
“In the longer term we believe that sustainable investment approaches will form an increasingly important part of our clients’ asset allocation decisions and a significant amount of work consists of helping them find the best ideas and strategies.”
David Harris, director of responsible investment at the FTSE group said one of the potential barriers to growth in the area of sustainable indices was transparency.
“Indices need transparent methodologies. There is a danger that indices using opaque assessment approaches may affect the sector’s reputation. It is important for all providers to be clear on index methodologies and how securities are assessed on ESG factors,” he said.
© Fair Investment Company Ltd