Survey: ESG Criteria Boosts Returns for Majority of Institutional Investors

Consideration of environmental, social, and governance (ESG) factors during the investment process has positively impacted investment performance, according to a survey of institutional investors conducted by LGT Capital Partners and Mercer.

[The full report can be read here.]

The survey reveals that less than 1 in 10 institutional investors felt ESG factors harmed investment performance. For the majority of survey respondents, ESG criteria had a positive effect on returns.

More on the results of the survey, from Ai-CIO:

Swiss alternative investments specialist LGT Capital Partners and global consultant Mercer surveyed 97 institutional investors from around the world, including decision makers for pension funds, foundations, and endowments. Of those, 57% said their use of ESG criteria had had a positive impact on performance. Only 9% said they felt it detracted from returns.

This shows that ESG analysis has moved beyond ethical concerns and has firmly found its place as a risk and investment management topic,” said Tycho Sneyers, managing partner at LGT.

He added that asset owners increasingly see ESG “as a valuable risk management tool.” “Long-term returns are more driven by avoiding bad investments than by picking all the winners,” Sneyers said, so screening for ESG risks is often seen as beneficial.

More than two-thirds of investors questioned said the primary reason for incorporating ESG into investment decisions was “reputational risk management.”

A report from the London Business School last month revealed that private equity firms have felt mounting pressure from European pension funds to implement ESG criteria into their investment strategy.

Photo by  Paul Falardeau via Flickr CC License