ESG in 2024: Emphasising the social and DE&I in investment strategies

As we approach 2024, the landscape of Environmental, Social, and Governance (ESG) continues to evolve with a notable shift towards the social component and Diversity, Equity, and Inclusion (DE&I). Recent analysis by Natixis Investment Managers (IM) has highlighted a significant trend: 57% of institutional investors are reshaping their investment strategies due to the increasing politicisation of ESG. This impact is particularly pronounced in Europe and Asia, compared to North America.

Furthermore, a substantial 62% of investors recognise the potential for generating alpha, or excess returns, through ESG-focused investments, signalling a pivotal move towards integrating these considerations across all investment processes.

The rising importance of DE&I in investment decisions

Institutional investors are increasingly concentrating on DE&I factors. Nearly half of the surveyed participants are prioritising these elements in their investment decisions. This trend aligns with broader societal shifts towards inclusivity and equitable representation, making DE&I a critical component of responsible investing.

The Investment Association’s findings on neurodiversity

However, a recent report by the Investment Association has brought to light a concerning gap in DE&I practices, particularly regarding neurodiversity. The report, compiled in collaboration with WTW’s Thinking Ahead Institute, presents an industry-wide analysis of equity, diversity, and inclusion (EDI) data in the UK investment management industry. The findings, based on responses from 52 UK investment and fund management firms, interviews, and other sources, reveal a significant oversight in neurodiversity and caring responsibilities.

  • The EDI Data Survey indicates that neurodiversity and caring responsibilities are the least tracked metrics among firms. Only 25% of firms are actively collecting data in these areas.
  • Alarmingly, 42% of firms have no intention to gather data on neurodiversity or caring responsibilities.
  • In the UK, an estimated 15-20% of the population is neurodivergent, highlighting a substantial portion of the workforce.

The value of neurodiverse inclusion

Incorporating neurodiverse individuals into the workforce isn’t just a matter of social responsibility; it’s a strategic advantage. Neurodiverse inclusion has been linked to enhanced productivity, fostering innovation, and reducing staff absenteeism. For asset managers and investment teams, recognising the value of a neurodiverse workforce is crucial. It reflects a commitment to comprehensive DE&I practices and aligns with the principles of ESG investing.

The imperative for investors

As the focus on DE&I in investment decisions intensifies, it’s essential for investors and asset managers to ‘practice what they preach.’ Embracing neurodiversity and inclusivity within their own teams is not only ethically sound but also aligns with the very principles they seek to promote through their investment strategies. This alignment ensures credibility and integrity in ESG-focused investing.

Looking ahead to 2024, the integration of DE&I, especially elements like neurodiversity, into ESG investment strategies presents both a challenge and an opportunity. For asset managers and investment teams, this means not only adjusting their investment criteria but also leading by example in their organisational practices. Those who embrace these changes holistically are likely to be at the forefront of responsible and successful investing.

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