Catching the ESG wave
September 19, 2017

More than a quarter of North American institutions use environmental, social and governance (ESG) standards in their investment portfolios, and approximately 60 percent of institutions that have not yet incorporated ESG into their portfolios say they are open to doing so in the future.

Those are among the key findings of a new Greenwich Associates special study on ESG investing, for which Greenwich Associates says it interviewed 150 institutional investors in the United States and Canada, including pension funds, endowments, foundations, investment consultants, and others.

"The spread of ESG standards among institutional investors has important ramifications not only for asset managers competing for institutional mandates, but also for retail investors, businesses, policy makers, activists and virtually anyone else with an interest in how the global economy and global markets develop," says Greenwich Associates Managing Director Andrew McCollum.

The relatively widespread adoption of ESG among institutional investors is recent development in North America. Twenty-seven percent of institutions participating in the study employ some type of ESG standards in their portfolios. About half these current users - and nearly two-thirds of the ESG users among public and corporate pension funds - started using ESG within the past three years. Endowments and foundations were the earliest adopters and have the most experience with ESG. 

Among institutions that are not using ESG, 1 percent have concrete plans to adopt ESG, one-in-ten say they are considering adopting ESG, and half say they are open to considering it in the future. Thirty-nine percent say they will not consider adopting ESG at any time.

The study results demonstrate that ESG standards can be applied to an institutional portfolio in a variety of ways. "Although institutional investors that use ESG say these standards come into play in about half their asset manager searches, only a relatively small minority screen specifically for ESG from the outset," says Greenwich Associates Consultant Christopher Dunn. "A bigger share use ESG as a secondary or tertiary consideration, and a significant number use ESG only as a tie-breaker between otherwise equally matched managers."

 





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More than a quarter of North American institutions use environmental, social and governance (ESG) standards in their investment portfolios, and approximately 60 percent of institutions that have not yet incorporated ESG into their portfolios say they are open to doing so in the future.

Those are among the key findings of a new Greenwich Associates special study on ESG investing, for which Greenwich Associates says it interviewed 150 institutional investors in the United States and Canada, including pension funds, endowments, foundations, investment consultants, and others.

"The spread of ESG standards among institutional investors has important ramifications not only for asset managers competing for institutional mandates, but also for retail investors, businesses, policy makers, activists and virtually anyone else with an interest in how the global economy and global markets develop," says Greenwich Associates Managing Director Andrew McCollum.

The relatively widespread adoption of ESG among institutional investors is recent development in North America. Twenty-seven percent of institutions participating in the study employ some type of ESG standards in their portfolios. About half these current users - and nearly two-thirds of the ESG users among public and corporate pension funds - started using ESG within the past three years. Endowments and foundations were the earliest adopters and have the most experience with ESG. 

Among institutions that are not using ESG, 1 percent have concrete plans to adopt ESG, one-in-ten say they are considering adopting ESG, and half say they are open to considering it in the future. Thirty-nine percent say they will not consider adopting ESG at any time.

The study results demonstrate that ESG standards can be applied to an institutional portfolio in a variety of ways. "Although institutional investors that use ESG say these standards come into play in about half their asset manager searches, only a relatively small minority screen specifically for ESG from the outset," says Greenwich Associates Consultant Christopher Dunn. "A bigger share use ESG as a secondary or tertiary consideration, and a significant number use ESG only as a tie-breaker between otherwise equally matched managers."

 



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