The number of institutional investors incorporating ESG factors into investment decisions continues to grow, and more of those that have yet to do so are considering it, according to Callan's ninth annual ESG survey.
In its latest survey, Callan found that 49% of U.S. institutional investors incorporate ESG factors into investment decisions, above the 42% that said they were doing so in 2020 and more than double the 22% result from the first survey in 2013.
The 2021 survey also registered the highest rate of respondents, 40%, that are not yet incorporating ESG factors but are considering it, up from 30% in 2020.
Public defined contribution and defined benefit plans make up the top ESG incorporators in 2021, at 63%, a dramatic increase from the 36% in 2020, followed by endowments at 50% (down from 63% in 2020), while corporate defined benefit and defined contribution plans fell to 20% from 32% in 2020.
“We’re seeing the highest rate of ESG incorporation in the nine-year history of the survey, plus another 40% of investors considering it,” said Tom Shingler, senior vice president and Callan’s ESG team leader, in a statement. “This shows a strong secular trend toward ESG incorporation in the face of regulatory headwinds under the prior presidential administration. With the proposed ESG and proxy voting rule from the U.S. Department of Labor, the pace of adoption could accelerate from here.”
When asked for reasons for incorporating ESG factors, 55% said they did so to align their portfolios with their values, 54% said fiduciary responsibility, 46% said stakeholder concerns, 45% said improved risk profile, 34% said higher long-term returns and 18% to utilize their investment pool to make an impact.
Multiple answers were accepted.
The survey was conducted in May and June among 114 U.S. institutional investors, ranging from less than $500 million to more than $20 billion in assets.
