In 2016, 37% of institutional investors have “incorporated ESG
factors into decision making,” up from 29% in 2015 and 22% in 2013,
according to Callan’s fourth annual survey to assess the status of
environmental, social, and governance (ESG) factor integration in the
U.S. institutional market.
Some of this increase appears to be
driven by funds in the health care sector, which saw particularly high
adoption rates (62%). Endowments (53%) and foundations (48%) continue to
be the highest adopters relative to other fund types, though corporate
funds saw a material uptick in incorporation relative to a year ago,
doubling from 15% in 2015 to 30% in 2016.
By fund size, large
funds (greater than $3 billion in assets) tend to have higher rates of
adoption of ESG factors into investment decision making than smaller
funds. The largest funds (with more than $20 billion in assets) had the
highest adoption rates at 71%.
The most common implementation of
ESG is to add language to the investment policy statement (cited by 53%
of respondents that incorporate ESG). The greatest barrier to funds
incorporating ESG into investment decision making continues to be a lack
of clarity over the value proposition (cited by 63% of respondents that
do not incorporate ESG).
This year there were 84 unique institutional U.S. funds that responded
to the survey, representing approximately $843 billion in assets. The
research report is available on Callan’s website
. A free registration is required.