The inclusion of environmental, social and governance factors in investment processes should be considered by institutional investors but not necessarily mandated, CFA Institute members say.
The global association on Wednesday published a report based on a survey of its European Union members. It asked members to what extent ESG factors should be mandated in the investment process.
It found that 85% of respondents think it is appropriate for institutional investors to take ESG factors into account when making investment decisions. But 78% of respondents in Luxembourg were opposed to the idea of making it a regulatory requirement. Among U.K. members, 71% were against the idea, and 69% in Germany opposed regulatory intervention.
Further, 60% of all respondents said any mandate to consider ESG factors in investment analysis should not translate into forcing the manager or investor into making an ESG investment policy.
"Our survey highlights that a majority of investment professionals across the European Union are already using ESG factors in the investment analysis process, to ensure that all material impacts on the potential investment are considered," said Svi Rosov, director of capital markets policy at the CFA Institute and author of the report, in a statement accompanying the report.
A sizable minority (32%) did feel managers should invest in a way that is consistent with the implications of their ESG assessment and findings, the report said.
Among other findings was a division on whether there should be a formal taxonomy or rulebook on which ESG factors matter in investment analysis. The report said 35% of respondents are in favor of a voluntary taxonomy, while 24% would support a mandatory taxonomy.