Social or Environmental, Social, and Governance (ESG) investing is getting more attention from large institutional investors in five parts of the world than it did only five years ago.
Two separate studies, one conducted by RBC Global Asset Management and another by Callan Associates, show a trend toward a greater acceptance of ESG investing.
According to a new survey of global investors in the U.S., Asia, Europe, Canada, and the UK conducted by RBC, about 43% of institutional investors use some degree of ESG factors when making their investing decisions. This is an increase from 22% in 2013. The survey also found that ESG investing is expanding into fixed-income instruments in addition to equities.
ESG is an investment strategy that incorporates socially responsible investing (SRI, including divestment), sustainable, responsible, impact investing, non-discriminatory environmental protections, and non-intrusive business practices into daily business operations from publicly traded companies worldwide. An ESG investment manager then analyses these practices in every company it may invest in to see how and to what degree they comply with the ESG screens it constructs.
The ESG trend is popular among younger and wealthy investors who look at the society-changing power of their wealth. According to a report from Callan, about 45% of U.S. households are interested in ESG investing. The Callan report also found that 64% of endowments use some form of ESG in their investing strategies, an increase of 29% from 2013.
Key Findings
Highlights of the new RBC Global Asset Management survey found:
- 24% of institutions questioned said they believe an ESG-integrated portfolio would perform better than a non-ESG portfolio, a five-fold percentage increase from last year’s survey.
- About 18% of U.S. respondents still believed the ESG-integrated portfolio would perform worse, but that negative sentiment is down from 26% in the 2017 survey.
- 39% responded that ESG analysis generates alpha (market outperformance), compared to 17% who responded last year.
- In 2017, only 28% said ESG portfolios could reduce risk, compared to 54% this year.
- ESG also plays a role in fiduciary responsibilities. Over 50% of respondents said they use some form of ESG factors when making investment decisions, which is 50% higher than last year.
The complete RBC Global Asset Management Survey can be found here.
For more about ESG and social investing, look at these articles on this site.
https://theprogressiveinvestor.org/esg-investing-gets-a-new-boost-and-a-new-app/
https://theprogressiveinvestor.org/does-politics-have-a-valid-role-in-financial-services-marketing/
https://theprogressiveinvestor.org/alternative-investments-getting-popular…again/
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