Asset Owners Say Integration of ESG has Significantly Improved Returns, State Street Global Advisors Study Shows
April 19 2017 - 12:30PM
Business Wire
80 Percent of Asset Owners Now Have an ESG Component in Their
Investment Strategies
State Street Global Advisors (SSGA), the asset management
business of State Street Corporation (NYSE: STT), today
announced the results of a global survey of 475 institutions1,
which found that 68 percent of respondents say the integration of
an environmental, social and governance (ESG) strategy has
significantly improved returns, showing that the adoption of ESG
driven investment strategies has a future in institutional
portfolios.
The survey also found that 77 percent of respondents said they
invested in ESG strategies because such factors play a role in a
public company’s broader financial performance. While this growing
integration of ESG strategies is a good sign, active ownership
remains a critical part of the comprehensive strategy, as findings
show that 78 percent of asset owners have some level of ESG
engagement with the companies in which they invest taking ESG
investment beyond negative screening.
“There’s a collective shift in the institutional investment
world right now that has asset owners and managers thinking
differently about the full implications of their investments,” said
Chris McKnett, head of global ESG business at SSGA. “For the
majority, the question is no longer, ‘should we consider ESG as
part of our mandate,’ the question is ‘how are we actively pursuing
opportunities with our investments that help us reach our financial
goals, while encouraging change in the process?’”
Expectedly, all investment approaches face some type of
challenges. Nearly two-thirds of respondents (57 percent) say it’s
difficult to benchmark performance against peers. Fifty-six percent
said the accurate assessment of external ESG asset managers was a
key issue. Nearly half (49 percent) of asset owners say that fees
and expenses are the main barriers to further incorporating ESG
into portfolios, followed by a lack of internal knowledge on the
matter.
“In the last four or five years, we’ve seen a marked increase in
the level of awareness and interest in ESG at the institutional
level, which is extraordinarily promising,” said Rakhi Kumar, head
of ESG Investments and Asset Stewardship at SSGA. “There’s a
broader appreciation of the notion that good governance translates
into better management of areas such as a company’s carbon
footprint, as well as how management engages with the workforce.
The companies that operate this way, we believe, are better quality
investments that yield better performance long term.”
Other Key Findings:
- Comparing ESG Appetites by
Region – 40% of investors in Europe and 38% of investors in the
US have 25–49% of their investments with ESG allocations. In
Asia-Pacific, half of investors have less than 25% of investments
with ESG allocations
- A large majority of respondents (69%)
say that pursuing an ESG strategy has helped with managing
volatility.
- Despite many surveyed investors
expressing satisfaction with the performance benefits of their ESG
strategies, overall ESG exposure remains low — on average only a
third of adopters’ investments incorporate ESG criteria. Our
results suggest that investors expect that proportion to grow over
the next two years — to around 40% of their portfolio.
- 84% of respondents are satisfied or
very satisfied with the financial performance of their ESG
strategy.
The full survey report can be viewed here.
About the survey
State Street Global Advisors surveyed 475 asset owners in the
UK, France, Germany, Italy, Switzerland, Nordic countries, the
Netherlands, Korea, Singapore, Japan, China, Hong Kong, Australia
and the US. Respondents included public and private pension funds,
endowments, foundations, family offices, sovereign wealth funds,
central banks and supranationals. The survey was conducted in
December 2016 and January 2017.
About State Street Global Advisors
For nearly four decades, State Street Global Advisors has been
committed to helping financial professionals and those who rely on
them achieve their investment objectives. We partner with
institutions and financial professionals to help them reach their
goals through a rigorous, research-driven process spanning both
active and index disciplines. We take pride in working closely with
our clients to develop precise investment strategies, including our
pioneering family of SPDR ETFs. With trillions* in assets under
management, our scale and global footprint provide industry leading
access to markets and asset classes, and allow us to deliver expert
insights and investment solutions.
State Street Global Advisors is the investment management arm of
State Street Corporation.
*Assets under management were $2.47 trillion as of December
31, 2016. AUM reflects approx. $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.
State Street Global AdvisorsOne Lincoln
StreetBoston, MA 02111 - 2900
CORP-2861
Exp: 4/30/2018
1 4/15/2017: Survey respondents include private and public
pension funds, endowments, foundations and official
institutions.
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version on businesswire.com: http://www.businesswire.com/news/home/20170419006214/en/
State Street CorporationAndrew Hopkins, +1
617-664-2422Ahopkins2@StateStreet.com
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