A majority of institutional investors have yet to fully embrace environmental, social and governance investing, and those who do typically are early stage — that is, they only use negative and positive screening to adapt portfolios, according to a new study by CoreData, a financial services research and strategy consultant.
The online study of 800 global institutions representing total assets of about $16 trillion was taken during the second quarter 2019, and also included several in-depth interviews, according to Craig Phillips, head of international CoreData Research. Institutions surveyed included pension funds, multi-managers, insurance companies, private banks, endowments and foundations and sovereign wealth funds.
The study showed that 52% of those in the study were still ESG adopters, while 37% were ESG embedders — those that show a high degree of incorporation through corporate engagement, sustainability themes and impact investing. The rest, 11%, had no ESG focus.
“The biggest surprise the study unearthed was that despite all the grandstanding, institutional investors are only just beginning the ESG journey,” Phillips told ThinkAdvisor in an email. “Investors are largely early-stage adopters of ESG and have some way to go before they incorporate and embed sustainable investments into portfolios.”
He said this showed a “disconnect between ESG appearances and reality,” raising the question of whether institutions “see ESG as merely a marketing and PR tool or something that can genuinely help investors align their values with investments.”