ESG Incorporation by Institutional Investors
From the US SIF Foundation
The US SIF Foundation also conducted research on 530 institutional asset owners with $6.2 trillion in ESG assets, equivalent to 51 percent of the $12.01 trillion that money managers identified as institutional assets. Because money managers do not disclose information about their institutional clients, the data received from our direct research of institutional investors shows how and why they incorporate ESG criteria into their investment analysis and portfolio selection. The institutional ESG incorporation trends revealed through this research should be understood as representing the most transparent institutional investors in the United States. The group included institutional asset owners and plan sponsors such as public funds, insurance companies, educational institutions, philanthropic foundations, labor funds, hospitals and healthcare plans, faith-based institutions, other nonprofits and family offices.
Of this $6.2 trillion in institutional ESG assets:
- Public funds represented the largest share — 54 percent ($3.4 trillion) — as shown in Figure F.
- Social criteria were applied to more than 92 percent. The assets managed in accordance with social criteria increased 9 percent since 2018, as shown in Figure G, above.
- Investment policies related to conflict risk affected $2.7 trillion, as shown in Figure H, making it the single most prominent ESG criterion among institutional investors, in asset-weighted terms.
- Continuing a trend that began in 2012, criteria related to climate change and carbon emissions remained the most important environmental issue for these institutions, affecting $2.6 trillion.
- Tobacco remained in the top five specific ESG criteria for institutional investors, although slightly decreasing from 2018 by 3 percent to affect $2.5 trillion in assets in 2020.
- Board issues were the most prominent governance criterion reported by institutional investors, incorporated into the management of $2.3 trillion in assets, a 32 percent increase from 2018.
- Sustainable natural resources and agriculture ranked as the second most heavily weighted environmental issue for institutional investors, affecting almost $2.2 trillion in assets, a 95 percent increase since 2018.
Order a copy of the Report on US Sustainable and Impact Investing Trends 2020 from the US SIF.