State Street’s Center for Applied Research Reveals Industry-Wide Shift as Investors Find Sustainable Value through ESG
March 27 2017 - 12:00PM
Business Wire
State Street Strengthens ESG Capabilities Across Organization to
Meet Increasing Client Demand
A global surveyi of both institutional and retail investors
sponsored by State Street Corporation (NYSE: STT) found that
traditional obstacles to environmental, social and governance (ESG)
investing are fading, while one significant barrier remains: the
lack of transparent, standardized and quality data.
The findings from State Street’s Center for Applied Research
(CAR), co-authored by Professor Robert Eccles, visiting professor
at the Said Business School of Oxford University, will inform an
expansion of ESG solutions across the organization, including the
impending introduction of a suite of ESG analytics tools and
enhanced asset safekeeping using data-driven insights. These
capabilities will add to existing ESG investment strategies State
Street Global Advisors (SSGA) has been managing for more than 30
years, including positive and negative screens as well as
multi-asset strategies. SSGA also works with large institutional
investors to integrate ESG signals into their active investment
strategies, and engages with companies through its asset
stewardship program to promote long-term, sustainable returns.
The Investing Enlightenment: How Principle and Pragmatism Can
Create Sustainable Value through ESG found that nearly all (92
percent) institutional investors surveyed want companies to
explicitly identify ESG factors that materially affect performance,
while 60 percent note a lack of industry standards for measuring
ESG performance as a significant barrier to full integration.
Forty-six percent of retail investors want to see more companies
reporting ESG performance-related data and 46 percent say they need
more ESG data from other sources to make educated decisions.
“We have entered into a new era of investing characterized by
leveraging capital markets for a better society,” said Lou Maiuri,
executive vice president and head of State Street Global Exchange
and Global Markets businesses. “The promise of this new type of
investing, ESG, is grounded in data transparency and engagement.
Having a custodian for data has become just as critical as having a
custodian for financial assets when trying to deliver long-term
value for investors in today’s market.”
“Over the long-term, environmental, social and corporate
governance issues can have a material impact on a company’s ability
to generate returns," said Ron O’Hanley, president and chief
executive officer at State Street Global Advisors. “Investors,
especially those with a fiduciary role, must consider what the
world looks like today, tomorrow and beyond. At State Street Global
Advisors, our mission is to invest responsibly on behalf of our
clients to enable sustainability, economic prosperity and social
progress over the long term. A focus on ESG issues is a critical
requirement for us to deliver against the mission.”
While data and a lack of transparency continue to pose hurdles
to ESG investing, the CAR study found that many of the traditional
barriers to ESG integration are receding:
- Only 35% of institutional investors
believe ESG equals lower returns
- Just 10% of survey respondents say they
view fiduciary duty as a barrier to ESG integration
- Nearly three quarters of investors
(74%) see three-plus years as a realistic timeframe to gain
outperformance from ESG investments
To help investors move more easily from ESG aspiration to
integration, State Street offers a mix of investable products from
low carbon and gender diversity ETFs to multi-factor risk analytics
capabilities like ESG exposure reporting. Based on its research
study, the company has also developed a model to help investors
successfully integrate ESG investing into their investment
strategies. This new model is based on five actions:
- Take ownership:
- Ensure there is decisive support from
the organizations’ c-suite and board on ESG issues; Individual
investors should align portfolio decisions to what they believe is
important.
- Get educated:
- Provide training on ESG across the
investment organization, particularly sector portfolio managers,
financial advisors and analysts.
- Ask to get the data and solutions
you need:
- In addition to asking companies for
data, support industry efforts for increased standardization of ESG
data and reporting requirements, and enable meaningful conversation
between financial advisors and individual investors.
- Incorporate a materiality
filter:
- Investment decisions should be based on
the material ESG issues.
- Align time horizons:
- Adjust performance metrics and
incentives structure to reflect the longer-term nature of ESG
investing.
“We’ve seen significant progress in investors’ understanding of
ESG over recent years but believe further progress can be made to
move more investors from ESG awareness to full integration,”
continued Maiuri. “We hope this study will contribute to greater
ESG adoption and understanding.”
About State Street
State Street Corporation (NYSE: STT) is one of the world's
leading providers of financial services to institutional investors,
including investment servicing, investment management and
investment research and trading. With $29 trillion in assets under
custody and administration and $2 trillion* in assets under
management as of December 31, 2016, State Street operates in more
than 100 geographic markets worldwide, including the US, Canada,
Europe, the Middle East and Asia. For more information, visit State
Street’s website at www.statestreet.com.
* Assets under management were $2.47 trillion as of December 31,
2016. AUM reflects approximately $30.62 billion (as of December 31,
2016) with respect to which State Street Global Markets, LLC (SSGM)
serves as marketing agent; SSGM and State Street Global Advisors
are affiliated.
The whole or any part of this work may not be reproduced, copied
or transmitted or any of its contents disclosed to third parties
without State Street express written consent.
All material has been obtained from sources believed to be
reliable. There is no representation or warranty as to the accuracy
of the information and State Street shall have no liability for
decisions based on such information.
Investing involves risk including the risk of loss of
principal.
State Street Corporation, One Lincoln Street, Boston, MA
02111-2900
(C) 2017 State Street Corporation - All Rights Reserved
CORP-2791
i The study is based on a global survey of 582 institutional
investors who are, or plan to, implement environment, social and
governance (ESG) into their investment process and 750 individual
ESG and non-ESG investors.
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version on businesswire.com: http://www.businesswire.com/news/home/20170327005829/en/
State Street CorporationBrendan Paul,
+1-617-662-2903Bpaul2@statestreet.com@StateStreet
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