Majority of Factor Investors Now Prioritize ESG for Long-Term Gains
Invesco, the renowned investment management company, has revealed in its latest 'Global Factor Investing Study' that a majority of factor investors are now prioritising Environmental, Social, and Governance (ESG) criteria to enhance long-term performance. This shift marks a departure from the past, when major shareholders' demands were the primary driver for adopting ESG strategies.
The study, which surveyed 241 factor investors managing a combined $31 billion in assets, found that 78% of those employing factor strategies intend to integrate ESG criteria into their portfolios. This significant number underscores the growing recognition of ESG factors as a means to improve investment outcomes.
However, some investors have reported an 'ESG bias' in their portfolios. For instance, a focus on ESG criteria may lead to an unintentional over-reliance on quality stocks, potentially at the expense of value stocks in the equity sector.
Invesco's study highlights a clear trend towards ESG integration in factor investing, with a substantial majority of investors planning to consider these criteria. While this shift brings potential benefits, investors must also be aware of and manage any ESG-related biases that may arise in their portfolios.
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