Callan: One-fifth of institutional investors incorporate ESG into investing

Only about one-fifth (22%) of U.S. institutional investors incorporate environmental, social and governance strategies into their investment decision-making, with only an additional 7% considering it, according to a new survey conducted by Callan Associates.

In September, Callan conducted a survey to assess the status of ESG, including engaging in responsible and sustainable investment strategies, and socially responsible investing, in the U.S. institutional market. The firm collected responses from 129 U.S. funds representing a total of about $830 billion in assets.

“ESG is a topic that's been getting a fair amount of discussion lately, so Callan wanted to get some hard data about this topic,” Anna West, a vice president and manager of the published research group at Callan Associates and author of the survey, said in a phone interview.

By asset owner type, 35% of foundations incorporate ESG strategies; 22% of endowments; 15% of public pension funds; and 14% of corporate pension funds.

“The larger the fund, the more likely they are to be integrating ESG,” Ms. West added. About 20% of respondents with less than $500 million in assets incorporate ESG strategies into their investment decisions. Meanwhile, 23% of funds between $500 million and $2 billion incorporated them, and 29% of funds larger than $2 billion used them.

The most common reason for investors' shunning ESG was a lack of clarity over what value they're getting out of such investing, followed by a perceived disconnect between ESG factors and financial outcomes.