ESG Incorporation by Institutional Investors

The US SIF Foundation also researched the ESG incorporation practices of institutional asset owners. Because money managers generally do not disclose confidential information about their institutional clients, the data received from our direct research of institutional investors show how and why they incorporate ESG criteria into their investment analysis and portfolio selection. 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.

Using the modified methodology, this Trends Report identified 497 institutional asset owners applying ESG incorporation practices across $6.6 trillion in assets under management.

• Among the institutional investors, public funds hold the largest share of assets using ESG criteria and represent the greatest number of institutions reporting the incorporation of some form of ESG criteria in their investments. See Figure E.

 

• For the first time, institutional investors reported climate change as the leading ESG criterion they addressed in asset-weighted terms, affecting $4.0 trillion. See Figure F at top of page.
• Another leading environmental issue investors considered is sustainable natural resources and agriculture, reflected in $2.8 trillion in assets.
• The top social issue in asset-weighted terms is the restriction of investments in companies doing business with conflict risk countries, affecting $3.3 trillion.
• Other prominent social issues are health and safety criteria, tracked for the first time and addressed across $2.1 trillion, and EEO/diversity, affecting $2.0 trillion.
• The top governance criterion identified for institutional investors is board issues, which includes the consideration of the directors’ independence, diversity, pay and responsiveness to shareholders, across $2.9 trillion.