ESG Really Is Going Mainstream - Morgan Stanley Global Survey

Robbie Lawther

21 June 2018

A new survey finds that a big majority (70 per cent) of some of the world's largest investments pools have used their financial muscle to put environmental, social and governance-themed ideas into action, a growing trend within the financial services sector.

And, 84 per cent of asset owners said they are pursuing or actively considering pursuing ESG integration in their investment process, according to a study by . The bank surveyed 118 public and corporate pensions, endowments, foundations, sovereign wealth entities, insurance companies and other large asset owners worldwide (North America, Asia and Europe) about trends, motivations, challenges and implementation approaches in sustainable investing. Of the total number of groups polled, 60 per cent of which had total assets over $10 billion.

The report also found that 49 per cent of those have implemented ESG across their entire portfolio and 21 per cent have such ideas in part of them.

Also, of those that have already implemented ESG strategies, around 60 per cent have done so in the last four years and 37 per cent within the last two years.

A number of industry surveys as well as product launches and comments show that ESG-driven investment is an increasingly prominent feature. This is being driven by firms' own desire to build trust with sometimes disenchanted investors, as well as reach out to younger, and supposedly more idealistic, clients. This publication has heard for some investors, ESG approaches reduce volatility and enhance returns. There has been debate about whether these approaches really generate added value over time and can withstand shocks such as a recession.

Approach
The survey also found that 78 per cent of respondents said risk management was an important factor driving sustainable investing at their organisations, and 77 per cent said return potential was important. Also, some 78 per cent seek to align their investments with the UN Sustainable Development goals or are considering doing so.

Many respondents (77 per cent) agreed they have a responsibility to address sustainability through their investments, yet; proof of market-rate financial performance remains the top challenge for them.

In addition, only 42 per cent of those surveyed said that they have adequate tools to assess sustainability.

“The survey results identify a strong commitment to incorporating ESG criteria into investment strategies among asset owners. However, there is still a gap between interest and implementation – with investors citing access to quality ESG data as a top concern,” said Hilary Irby, co-head of global sustainable finance at Morgan Stanley. “With this growing momentum in sustainable investing, third-party managers have an opportunity to increase implementation by improving reporting tools and education, and developing capabilities to align portfolios with owners’ unique objectives.”