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ESG analysis grows in all regions for CFA Institute members; EMEA takes biggest leap

Portfolio managers and data analysts in North and South America continue to fall behind the Europe, Middle East and Africa and Asia-Pacific regions in their use of ESG factors in their investment decisions and analysis, said a survey report released Wednesday by the CFA Institute.

Although environmental, social and governance consideration was up for all regions from the CFA Institute's 2015 survey, Europe, the Middle East and Africa replaced Asia-Pacific as the region where investors are most likely to take ESG issues into account at 85%, up from 74% in 2015. Meanwhile, some 81% and 68% of investors in the Asia-Pacific and Americas, respectively, said they take ESG factors into account, up from 78% and 59% in 2015.

EMEA was also the region where most respondents said they receive training on ESG issues — 43% compared to 30% and 28% for the Americas and Asia-Pacific, respectively. Seventy-five percent of all respondents would like employees to receive training on ESG issues.

Among the 27% of investors globally who do not factor ESG issues into their investment decision-making, 66% said they would if there was client demand, up from 57% in 2015, followed by a proven link between ESG investing and financial performance at 53% (compared to 48% in 2015).

Additionally, 77% of respondents said board accountability was the most "impactful" ESG issue, followed by human capital at 65% and environmental degradation, 62%.

Unchanged from 2015, 61% of respondents said public companies should be required to report on a cohesive set of sustainability indicators at least annually. Some 50% of respondents now believe it is necessary to have an audit-quality verification process for ESG disclosures, up from 44% in 2015.​

Other finding from the survey include:

  • 62% of female respondents said they "systematically" consider ESG factors in their investment analysis rather than just occasionally, compared to 49% of male respondents (15% of the survey respondents were women);
  • 46% of male respondents said they believe ESG issues are immaterial or do not add value to investment analysis or decisions compared to 18% of women; and
  • 78% of millennial respondents said they consider ESG factors, compared to 74% of Generation-X respondents and 68% of baby boomers (29% of respondents were millennials, 49% were Gen Xers, 19% were baby boomers and the remainder did not identify); and
  • 60% of survey respondents in the past three years said they have not engaged companies or submitted shareholder resolutions on any of the nine surveyed issues — executive compensation, board accountability, environmental degradation, climate change, board diversity, human capital, supply chain, resource scarcity and demographic trends.

More than 1,500 portfolio managers and investment analysts, all CFA Institute members, were surveyed between May 9-23.