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Big Money Managers Fall Short in Disclosing ESG Investment Strategies: Report

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More and more U.S. money managers are incorporating environmental, social and governance factors into their investment analysis and portfolio construction, according to US SIF: The Forum for Sustainable and Responsible Investment.

They are primarily driven by the demand for ESG investing products from institutional and individual investors and by their own mission and values.

US SIF recently assessed 16 big firms that practice ESG integration, the systematic and explicit inclusion by investment managers of ESG risks and opportunities into traditional financial analysis.

Researchers found that half of these managers either did not inform investors of their criteria, or did so only partially.

The report said the 16 surveyed money managers were the largest that practiced ESG integration in the U.S. Collectively they represented more than $3 trillion in total assets under management at the end of 2014, of which between $1.3 trillion and $2.7 trillion was subject to ESG integration. 

These assets, in turn, were a significant portion of the $4.7 trillion in ESG integration assets under management that US SIF identified in its 2014 biennial survey of sustainable, responsible and impact investing in the U.S.  

According to the report, the assets of the eight money managers who did not or only partially disclosed the ESG criteria they considered represented some 60% of the total ESG assets of the money managers surveyed.

“While we are heartened by the growth of ESG integration, we believe money managers must provide greater disclosure about how they implement these strategies,” Lisa Woll, chief executive of US SIF and the US SIF Foundation, said in a statement.

“Obtaining information about the ESG criteria money managers consider in investment analysis is critical for investors to understand the impacts of ESG integration on their portfolios, as well as on the companies assessed and society at large.”

According to US SIF, six managers surveyed said in their most recent public reports to the global Principles for Responsible Investment that they practiced 100% ESG integration for listed equities only, one for fixed income only and six for both these asset classes.

In addition, some of the money managers said they were applying ESG integration techniques to assets in private equity and property.

In many cases, managers’ descriptions of their ESG integration strategies and criteria provided clear evidence that ESG integration was in fact being applied across an entire asset class, the report said.

In other cases, however, it was unclear whether ESG integration was taking place systematically, according to the report.  For example, one money manager describing its ESG integration program said it involved sharing key ESG information with all its investment teams, but did not explain to what extent the recipients actually used, or are expected to use, this information. 

Another manager said its analysts were not required to review a specific set or framework of ESG indicators before deciding whether to invest in a company. The study divided the 16 money managers into three categories according to how much detail they disclosed publicly on the specific factors they considered in ESG integration:

  • Eight money managers provided either examples or detailed information on the ESG criteria they consider for all relevant asset classes
  • Four that practiced ESG integration across multiple asset classes provided this detail for one asset class but not for all
  • Four did not publicly disclose the ESG criteria they considered


The report recommended that money managers apply specific ESG criteria in ESG integration strategies and disclose their criteria.

It also recommended that money managers clearly articulate whether their ESG integration practices were systematic and consistent across all affected assets or were applied only ad hoc or upon request.

To help accomplish the first two goals, the report recommended that investment analysts, portfolio managers, researchers, consultants and other financial professionals avail themselves of education and training opportunities in sustainable, responsible and impact investing.


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