Public beats private in ESG adoption, according to Callan’s latest report on the topic, meaning “public plans have incorporated ESG factors into the investment decision-making process at a higher rate than their corporate counterparts.” Callan’s 2019 ESG Survey, conducted from May to July 2019, reflected input from 89 unique institutional investors, according to the company, who were asked about their approach to environmental, social, and governance (ESG) factors when evaluating investments.
For the purposes of the survey, ESG factors included “socially responsible investing (SRI, including divestment), sustainable investing, responsible investing, impact investing, and other associated terms.”
The most recent survey, the seventh the institutional investment consulting firm has conducted, “found that U.S.-based institutional investors are increasingly incorporating ESG considerations into their investment decision-making process.”
The ratio of investors either incorporating or thinking about incorporating ESG was about half of the respondent pool in 2019.
Overall, the incorporation of ESG factors into the investment decision-making process nearly doubled to 42% in 2019 compared to 22% in 2013.
Key findings
ESG was relatively new for most survey respondents, it added: 62% of funds that utilized it began doing so in the past five years.
- Foundations reported the highest rate of incorporation in 2018 at 64% but fell to 44% in 2019. While 22% of foundations that did not utilize ESG are considering it, the top reason for not implementing was a focus on only purely financial factors in investment decision-making.
- 49% of public funds incorporated ESG in 2019, up from 15% in 2013.
- The survey respondents with more diverse boards were more likely to be incorporating ESG into investment decisions than those with less diversity as gauged by differences in gender, race, ethnicity, and age.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.