Most investors consider ESG issues
The majority of portfolio managers and investors consider environmental, social and governance (ESG) factors when investing despite discourses pointing out that these issues do not receive sufficient attention, a study by the CFA Institute found.
The CFA Institute launched an ESG guide for investment professionals, who found only 27 per cent of respondents did not consider ESG issues when investing, which meant 73 per cent at least considered ESG issues, or a combination of those issues in their investment decisions.
The guide also said investors used a combination of six methods to consider ESG in their investment decision-making, and that these were not mutually exclusive: exclusionary screening, best-in-class selection, thematic investing, active ownership, impact investing, and ESG integration.
Both value-motivated (moral values) and values-motivated (economic imperative) investors considered ESG issues in investment decisions.
The survey of 1,325 portfolio managers and research analysts showed 63 per cent of investors considered ESG issues to help manage investment risks, while 44 per cent considered it due to client/investor demand, and 37 per cent thought it was their fiduciary duty.
Only seven per cent did it because "regulation requires it", illustrating that regulation was not driving ESG considerations.
However, 47 per cent of investors did not consider ESG issues due to lack of demand from clients/investors, while 35 per cent felt the issues were not material and added no value. A further 21 per cent felt they lacked knowledge on how to consider these issues.
CFA Society Sydney president, Anthony Serhan, said: "Awareness of ESG issues in investing from energy efficiency to employee relations to bribery and corruption has grown substantially in the last decade".
But he said it was still not clear how ESG issues affected investment management, and it was surrounded by myths.
AUTHOR
Malavika Santhebennur
Recommended for you
Investment executives say the benefits of real assets for client portfolios can “absolutely” outweigh the illiquidity risk, provided there is a good understanding of its risks and returns and of client goals.
Fund manager GSFM has appointed a key account manager for Queensland, following the appointment of a head of retail distribution last month.
The struggle to recruit specialist expertise in alternative asset classes means senior analyst salaries are surpassing $200,000 as fund managers compete for talent, observes Kaizen Recruitment.
TWC Investment Management, which launched in September, has unveiled a long-only equity fund targeting global wealth creator stocks.
