ESG investing is growing in the U.S. among institutional investors, with issues such as climate change, gender diversity and weapons distribution garnering significant attention.
Institutional assets invested under environmental, social and governance principles in the U.S. totaled $4.73 trillion at the start of 2016, a 16.9% increase from 2014, according to the U.S. SIF Foundation, Washington, which surveys investors every two years.
While results from the foundation's 2018 survey won't be available until November, a more recent Callan LLC survey found ESG factor incorporation increased among U.S. asset owners in 2018.
Among the 89 asset owners surveyed in May, 43% percent said they incorporate ESG factors into their investment decisions, up 6 percentage points from 2017 and 21 percentage points from 2013, the first year the survey was conducted.
In another sign of ESG investing's growth in the U.S., a combined 374 U.S. money managers, asset owners and other investment-related organizations had signed onto the United Nations-supported Principles for Responsible Investment as of June 30, up from 303 at the end of June 2017. By joining, signatories agree to implement six voluntary principles for responsible investment into their investment practices.
"More and more investors are really recognizing the merits of ESG as an added dimension to the investment process and a way to broaden your lens on risk and get a better view of the characteristics of your investments, both existing and prospective," said Alex Bernhardt, Seattle-based U.S. responsible investment leader at Mercer.
In Callan's survey, asset owners' top reasons for incorporating ESG were expectations to achieve an improved risk profile and fiduciary responsibility. The most popular implementation approaches cited were considering ESG factors with every investment/manager selection; communicating to investment managers that ESG is important to the plan; and engaging with management, actively voting proxies, and submitting shareholder resolutions.