Adoption of environmental, social, and governance (ESG) investments has slowly increased compared to 2022’s figures, yet is still lower than rates in 2021.
Research this month from investment consulting firm Callan found that 38% of 90 U.S. institutional investors, including respondents in public and corporate defined benefit (DB) and defined contribution (DC) plans, have incorporated ESG factors into investment decisions in 2024. That’s 3% higher compared to 2022’s 35% figure but still an 11-point drop compared to the 2021 high of 49%.
“ESG adoption has increased since our first survey in 2013 (22%), and we observe a subset of investors taking further steps toward ESG integration at the total fund and implementation levels,” said Tom Shingler, senior vice president and ESG practice leader at Callan.
Almost all (92%) respondents to the research said they’ve added ESG language to investment policy statements (IPS), making it the most common form of ESG integration. Sixty-seven percent have considered ESG factors with every investment/manager selection, 63% chose to add ESG options to align portfolios with organizational values, and 61% of foundations incorporated ESG, the highest adoption rate in 2024. Usage of diversity, equity, and inclusion (DEI) funds also increased, as 32% said they have incorporated DEI as part of the ESG focus—almost triple the amount compared to 11% in 2022.
Some continue to voice skepticism on the corporate sustainability funds. Forty-nine percent of those who have not added ESG options said they “will not consider factors that are not purely financial in their investment decisionmaking.”
As President-elect Donald Trump steps into office in January and as Republicans take control of both the Senate and House of Representatives, the future of ESG investments in retirement plan portfolios could be murky.
“This is also a time of federal regulatory uncertainty and increased politicization of ESG,” Shingler added. “Callan continues to view ESG through an investment lens, rather than political, and partners with clients to meet their investment objectives.”
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Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
