ESG Criteria Rapidly Becoming Part of Decision-Making Process For Institutional Investors, Says Study

A majority of institutional investors believe ESG factors have a positive impact on investment returns, and more than 75 percent of institutional investors incorporate ESG factors into their allocation decisions, according to a study from LGT Capital Partners and Mercer.

What’s more, ESG criteria have only very recently become important for most investors.

The study surveyed nearly 100 institutional investors in 22 countries. More findings, summarized by PlanSponsor:

* More than three-quarters of respondents incorporate ESG criteria when investing in alternative asset classes.

* More than half (57%) believe incorporating ESG criteria has a positive impact on risk-adjusted returns. A mere 9% think it lowers returns.

* Regarded with significance are issues with the potential to impact a company’s long-term risk, reputation or overall performance. Topics garnering strong support include carbon intensity, controversial weapons and bribery and corruption, while exclusionary criteria such as alcohol or tobacco are rarely considered.

* Among the institutional investors who incorporate ESG criteria into investment decision-making, 54% have done so for three years or less. This suggests rising expectations for investment managers over time, as well as a need for greater clarity on techniques and strategies for ESG incorporation to help investors progress more quickly.

You can find the full study here.

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