Eighty-five percent of CFA Institute members in a recent study say they take environmental, social and/or governance factors into account when investing, well above the 73% who said this three years ago.
The report says client demand has driven this growth, with 76% of institutional and 69% of retail investors having an interest in ESG investing.
More than 7,000 industry participants took part in the study, including some 4,400 industry clients, 2,800 investment practitioners and 250 participants from 31 markets in 27 virtual roundtables and interviews.
The report says three things account for sustainable investing going further than its forerunners:
- It’s additive to investment theory and doesn’t mean a rejection of foundational concepts.
- It develops deeper insights into how value will be created going forward using ESG considerations.
- It considers many stakeholders.
“Incorporating sustainability in investment management has become part of our industry’s mission to serve society by improving long-term outcomes,” Margaret Franklin, president and chief executive of CFA Institute, said in a statement.
“This moment represents a valuable opportunity for organizations to address this challenge and help shape a future worth investing in. As the focus on sustainability in investing gathers increasing momentum, it will eventually dictate the sustainability of investing itself.”
In addition to the study findings, the report focuses on four key areas of sustainable investing:
1. Alternative data.
The report says that with more data sources becoming available and more differentiation among data, technology is a necessary foundation for competitive advantage in ESG analysis.
Seven in 10 roundtable participants believed that the rise of alternative data would make sustainability analysis more robust. Three in five agreed that sustainability is an area where human judgement and active management will thrive, highlighting the often subjective and contextual nature of sustainability data, according to the CFA Institute.