Defined Benefit
Defined Contribution
Nonprofit

Survey: ESG Incorporation Nearly Doubles in 5 Years; Those Considering It Jumps

Survey: ESG Incorporation Nearly Doubles in 5 Years; Those Considering It Jumps
clock
2 min 36 sec

Each year, Callan surveys institutional investors to better understand their views on environmental, social, and governance principles, and the trends driving ESG adoption. In our recently published 2020 ESG Survey, we found that 42% of respondents incorporated ESG into their investment decision-making process, in line with the previous year’s level. But that figure has nearly doubled from the 22% of investors that incorporated ESG in 2013.

As significantly, we found that 33% of respondents not yet incorporating ESG were considering doing so, the highest in the survey’s history and nearly triple the level in 2019. This brings the ratio of those either incorporating or thinking about incorporating ESG to 61% of the total respondent pool in 2020.

Share of Respondents Considering ESG Incorporation
  • This year’s ESG Survey, conducted in mid-2020, reflects input from 102 U.S. institutional investors. For this survey, ESG factors include socially responsible investing (SRI, including divestment), sustainable investing, impact investing, and other associated terms. Respondents include public and corporate DB and DC plans, as well as endowments and foundations, ranging in assets under management from small (under $500 million) to large (more than $20 billion). The largest share of respondents (41%) is from the government sector.
Survey highlights:
  • Investor type: Public plans (36%) have incorporated ESG factors into the investment decision-making process at a slightly higher rate than their corporate counterparts (32%), but this level of incorporation was still dwarfed by that of endowments (63%) and foundations (57%).
  • Investor location: ESG adoption was highest by plans in the Northeast and on the West Coast.
  • Those not incorporating it: Despite the trends toward adoption, 56% of respondents did not incorporate ESG into investment decision-making—although as noted earlier, a third of those are considering it.
  • Motivations: The most frequently cited reason for incorporating ESG among respondents was to address stakeholder concerns. Conversely, the most frequently cited reason for not incorporating ESG was because the benefits of ESG incorporation were unproven or unclear. When comparing early adopters’ motivations for incorporating ESG versus recent adopters, recent adopters were more likely to be addressing stakeholder concerns and to be focused on an improved risk profile, while early adopters were focused on alignment with their organization’s values and impact.
Reasons-for-ESG-Incorporation-by-Investor-Type-768x696
* Multiple responses allowed
  • Allocations: Only 19% of respondents maintain an ESG allocation separate from their traditional portfolio, indicating broader ESG integration is preferred.
  • Implementation: Over half of respondents that incorporate ESG have communicated ESG’s importance to their investment managers, consider ESG with every investment/investment manager selection, and added ESG language to their IPS.
  • Coronavirus impact: 60% of respondents said the global COVID-19 pandemic has had no impact on their planned ESG initiatives, while 14% believed the pandemic will cause them to increase their rate of ESG adoption.
  • Product interest: Active U.S. equity (33%) led the list of strategies those implementing ESG would like to see more of, followed by active emerging market equity (28%).
  • Future direction: 37% of respondents that have incorporated ESG factors in investment decision-making do not plan to make any changes to their usage of ESG factors in the coming years.

This blog post provides a high-level overview of our survey findings. For the entire survey, with detailed data and analysis, please click below.

Posted by

Share
Share on facebook
Share on twitter
Share on linkedin
Related Posts
ESG

Interest in ESG Stays Level, Exclusive Callan Survey Finds

Hannah Vieira
Callan experts explain the results of the 2024 ESG Survey.
ESG

SEC Releases Final Climate Disclosure Rules

Kristin Bradbury
An explanation of the final SEC climate disclosure rules and what they mean for institutional investors.
ESG

The Heat Is On! Carbon-Footprinting Basics for Institutional Investors

Amit Bansal
Amit Bansal explains what carbon-footprinting means for institutional investors.
ESG

Callan Study Examines ESG Practices by Investment Managers

Kristin Bradbury
Kristin Bradbury summarizes our 2023 Asset Manager ESG Study.
ESG

S&P Global Moves Away from Numeric ESG Credit Indicators

Kristin Bradbury
Kristin Bradbury explains why S&P Global dropped its numeric credit indicators and what it means.
ESG

The ESG Rule Explained, Part 4: The DOL's Goals

ESG Consulting Group
Tom Shingler interviews a legal expert on the ESG rule issued by the Department of Labor.
ESG

The ESG Rule Explained, Part 3: Shareholder Rights

ESG Consulting Group
Tom Shingler interviews a legal expert on the ESG rule issued by the Department of Labor.
ESG

The ESG Rule Explained, Part 2: DC Plan Lineups

ESG Consulting Group
Tom Shingler interviews a legal expert on the ESG rule issued by the Department of Labor.
ESG

The ESG Rule Explained, Part 1: Fiduciary Principles

ESG Consulting Group
Tom Shingler interviews a legal expert on the ESG rule issued by the Department of Labor.
ESG

Biodiversity: A Relatively New Theme for ESG-focused Investors

Kristin Bradbury
Kristin Bradbury discusses the relatively new type of ESG thematic investing focused on biodiversity.

Callan Family Office

You are now leaving Callan LLC’s website and going to Callan Family Office’s website. Callan Family Office is not affiliated with Callan LLC.  Callan LLC has licensed the Callan® trademark to Callan Family Office for use in providing investment advisory services to ultra-high net worth clients, family foundations, and endowments. Callan Family Office and Callan LLC are independent, unaffiliated investment advisory firms separately registered with the Securities and Exchange Commission under the Investment Advisers Act of 1940.

Callan LLC is not responsible for the services and content on Callan Family Office’s website. Inclusion of this link does not constitute or imply an endorsement, sponsorship, or recommendation by Callan LLC of their website, or its contents, and Callan LLC is not responsible or liable for your use of it. When visiting their website, you are subject to Callan Family Office’s terms of use and privacy policies.