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September 2020
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Most asset owners plan to use ESG in smart-beta strategies, FTSE Russell says

The company polled 139 asset owners in January and February, just as the virus began to spread rapidly around the world from China
By Goh Thean Eu   
August 10, 2020

A majority, or 58%, of global asset owners plan to apply environmental, social and governance (ESG) considerations to their smart-beta strategies this year, up from 44% in 2019, as the coronavirus pandemic drives sustainability issues to the forefront of investing, according to an annual survey by index provider FTSE Russell.

The company polled 139 asset owners in January and February, just as the virus was starting to spread rapidly around the world from the epicentre in China. The World Health Organisation declared the outbreak as a pandemic on March 9.

The survey was aimed at studying the convergence of smart-beta strategies and ESG factors. It found that 80% of global asset owners with more than US$10 billion of assets under management are either evaluating or already implementing sustainability factors in their smart-beta strategies.

A smart-beta strategy typically focuses on one factor for investments, unlike a multi-factor strategy that gives investors exposure to a portfolio of stocks based on various factors, such as growth, value, low volatility and quality.

According to Jaakko Kooroshy, head of sustainable investment data and methodologies at FTSE Russell, the pandemic has “certainly focused investors on sustainability factors”.

“In addition, the recent social unrest has sharpened our clients' focus on factors around social and diversity policies and their impact on markets and company performance," Mr. Kooroshy says in the company’s Smart Sustainability: 2020 Global Survey Findings From Asset Owners report, published on August 6.

The survey also found that 47% of asset owners intend to increase allocations to smart-beta ESG investment strategies over the next one to two years, up from 44% in 2019.

Only 12% have no plans to raise their exposure, down from 14% in last year’s poll. The share of asset owners who were unsure was unchanged at 42%.

"In these turbulent times, this year's survey results are a striking reminder that sustainable investment is becoming an ever more important consideration for asset owners," Mr. Kooroshy says.