When investors were asked whether investing with environmental, social and governance (ESG) criteria could go hand-in-hand with producing alpha, 84% believed that they were compatible (36% responded that of course they were connected and 48% said they could be connected depending on the investment).

The findings are part of a recent survey by J.P. Morgan Asset Management (JPMAM) of more than 100 professional investors across APAC, representing 13 countries, on their sentiments towards sustainable investing.

“We strongly believe that sustainability has a material impact on the value of businesses in the long-term and these results suggest that APAC professional investors increasingly recognize the integral role ESG has in alpha generation,” says Richard Titherington, chief investment officer, emerging markets Asia-Pacific equities, J.P. Morgan Asset Management.

He continues, “ESG considerations have long been an embedded part of our fundamental research and our approach to investing, but today we are incorporating these factors even more explicitly. These considerations refine rather than restrict our investment decision making. Indeed, we find the most impressive corporate managers that we come across understand the value of effective stewardship of a company and the role that plays in delivering better profitability and operating performance, lower costs and superior risk management over the long-term.”

JPMAM’s research also found that 78% of approximately 100 professional investors surveyed are already incorporating sustainable investing considerations into their investment decision today or are planning to do so in the future. Although APAC investors remain on average significantly behind European investors in embracing ESG, compound annual growth rates for ESG integrated AUM have grown dramatically in Japan and Australia in the last few years. These survey results suggest investors are becoming more forward-looking in how they view sustainable investing as both a long-term driver of returns and a part of risk management.

ESG’s growing popularity in equities is only half the story, as investors increasingly incorporate ESG integration into mitigating downside risks in fixed income investing. Lisa Coleman, global head of investment grade credit, J.P. Morgan Asset Management, notes that ESG factors can be an important part of fundamental research analysis on future cash flows, helping to improve the portfolio management process and to understand embedded risk.

“We recognize sustainable investing represents a broad set of opportunities and that clients may choose to implement their views based on their own portfolio objectives. That’s why we’ve formalized a global leadership group called Sustainable Investment Leadership Team (SILT) comprised of investors, governance specialists and client advisors to create a driving force to shape and communicate our sustainable investing capabilities around our clients’ needs,” says Jamie Kramer, global head of strategic product management & ESG Lead, J.P. Morgan Asset Management.

“As sustainable investing continues to be increasingly embraced globally, the days of ESG as a box-ticking exercise are long past. ESG factors are a critical consideration in making informed, balanced investment decisions,” concludes Kramer.