ESG performance challenges drive interest in applying a factor approach to ESG

Invesco Global Factor Investing Study 2022

Theme 2

Factors are seen as an important tool by investors for maintaining performance when integrating ESG; 72% see improved performance as a driver for integrating ESG via a factor approach
Figure 1.1 Advantage of using factors to help implement ESG, % citations

What are the advantages of using factors to help implement ESG? Sample size: 94

We need more studies laying out the interdependence and correlations between factors and ESG

Retail investor, EMEA
66% of investors believe factors can be used to help implement ESG objectives, up from 42% in 2018. Around half of investors are using factors to integrate ESG
Figure 1.2 Belief that factors can be used to address ESG objectives, % citations

Do you believe that factors can be used to address your portfolio's ESG objectives? Sample size: 2018 = 132, 2022 = 146

Investors are keen for further research, with the lack of consensus around methodology and approach a barrier to implementation 
Figure 1.3 Challenges of implementing ESG with a factor approach, % citations

What are the challenges of implementing ESG with a factor approach? Sample size: 130

Read our key themes

Theme 3

End of the fixed income bull market sees investors looking to factors for new sources of return potential

In our third theme, we examine how and where factor investing is being used within fixed income. There are now high levels of belief in the application of factors within fixed income, and we find the potential end of the fixed income bull market has led to accelerating levels of demand for a factor approach. In particular, factors are seen helping to manage volatility and as an aid in delivering more diversified sources of return.

Theme 4

Accelerating rate of change in markets highlights the benefits of tactical tilting to a long-term, diversified multi-factor approach

In theme four, we explore approaches to implementation and find four-fifths of factor investors now adjust factor weights through time. This is driven by the varying performance of different factors over the economic cycle and desire to balance out exposures across the portfolio. We note many investors are using factor products both tactically and strategically and this differentiation plays an important role in product selection.

Read the full study below

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    Invesco Global Factor Investing Study 2022

    By Invesco

    Understand the drivers of factor investing, investor experiences, and methods of implementation. Read the PDF now.

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Important information

  • Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice.