ESG and allocations: 2021 client survey
As demand continues to rise for sustainability and impact-focused investment solutions, it is imperative that we do all we can to understand our clients’ evolving needs – so we can be better aligned and more intentional in our product development work.
With this in mind, we surveyed 133 of our LPs in 2021 to learn more about their overall commitment to ESG, sustainable, and impact investing, as well as their future allocation plans for dedicated products.* Survey respondents ranged from under $1 billion in assets under management to more than $300 billion, including several of the world’s largest private market investors.
Reflecting a marked increase in client interest, the survey generated a substantially higher response rate than our previous survey on ESG investing. Regionally, the highest response rate came from our EMEA client base, reflecting Europe’s leadership position in terms of adopting ESG investment solutions, in part due to recent regulation relating to how ESG strategies are marketed and disclosed to clients.
Regional response rates highlight Europe's leading ESG position
North America
South America
Europe/EMEA
Asia Pacific
Allocation strategies
Our survey questions were focused on current and planned allocation targets for ESG, sustainability, and impact strategies so that we could gain critical insights on this fast-growing trend. The main takeaway: nearly three-quarters (72%) of respondents plan to increase their allocations to ESG investment themes across 2022 and 2023.
The survey also highlighted a nine percentage point gap between planned and actual commitments of respondents – a margin that is expected to narrow over the next two years based on survey feedback. Of the clients that reported allocating to dedicated ESG and impact strategies, 76% already include private markets in that allocation and an additional 19% plan to do so over the next two years.
When asked to predict the long-term impact of their sustainability and/or impact objectives on their private market allocations, 72% of respondents said they plan to increase their private equity exposure, and 59% and 71%, respectively, plan to increase their allocations to private debt and infrastructure. These findings tell us that our clients see private markets as a critical component to meeting their sustainable investing goals.
Nearly three-quarters (72%) of respondents plan to increase their allocations to ESG investment themes across 2022 and 2023.
“We’re driven by the belief that strong financial returns and positive social change can be accomplished in tandem, and we want to be the partner of choice for delivering on both. It’s very encouraging to see that our clients share a similar market outlook.”
Co-CEO John Toomey
Key themes: Energy transition and UN SDGs
Beyond the need for structured and well-defined responsible investing theses, climate change and energy transition strategies – along with their requisite metrics and reporting – are becoming more entrenched as priorities.
Most respondents included climate change and energy transition (81%) and developing carbon neutral portfolios and a net zero emissions trajectory (53%) among their top-three priorities for dedicated ESG allocations.
More broadly, investors continue to reference the UN Sustainable Development Goals (UN SDGs) as a blueprint for impact investing. The UN SDGs were established in 2015 by all UN Member States as an urgent call to action for achieving a more sustainable future for all. In all, 68% of respondents said that seeking alignment with the UN SDGs through their dedicated allocations is a top priority.
* Percentages are calculated based on the number of respondents answering the respective question which may be less than the total number of survey participants (N=133)
ESG and sustainability are gaining momentum, but there's still an allocation gap
already consider private markets within their allocation targets and portfolio construction for sustainability and impact
expect to include private markets in future sustainability and impact allocation targets
gap between LPs’ target allocation to sustainable and impact investing strategies, and their actual allocation to these strategies
HarbourVest’s ESG, Sustainability, and Impact Investing survey included 133 LPs, ranging from public and private pension plans to foundations and family offices. LPs surveyed had AUM ranging from just under $1 billion to $300 billion, with a median AUM of $4 billion.
Edward Powers Managing Director
Q&A: Going deeper on what we heard
Managing Director Edward Powers was part of the team that developed HarbourVest’s Stewardship strategy , a solution that filters investments through a sustainability and impact lens to provide investors with more targeted exposure to these opportunities. Ed has more than two decades of impact investing experience. In the following interview, he shares his key takeaways from the survey.