Integrating ESG into the Investment Process
The world of investment is changing: asset owners and managers are becoming increasingly aware of the potential risk and value impact of environmental, social, and governance (ESG) factors, and their potential effect on an investment profile.
According to the annual PRI report for 2011, there are over 900 signatories from 48 countries to the UN Principles of Responsible Investment, representing a total of USD 30 trillion in AUM1. In 2011, 545 investors had completed the annual PRI assessment survey to outline how they are putting the six Principles for Responsible Investment into practice. Of these, 94% of asset owners and 93% of investment managers now have a formal RI policy. The report also revealed that over half of asset owner respondents’ externally managed funds are now subject to ESG integration, while 40% of the assets are managed by fund managers that have also signed the PRI. In terms of their relationships with investee companies, 71% of PRI signatories now ask companies to integrate ESG information into their financial reporting, while 61% of asset manager signatories now publicly disclose their voting policies, up from 55% in 20101.
These developments have put a strong emphasis on understanding the financial, not only the values, dimension of ESG and its systematic use in the mainstream investment process. ESG factors can have a material impact to the long-term risk and return profile of investment portfolios. Managing investment risk, including ESG risk, is part of an integrated portfolio construction and management process.
But what’s really involved in incorporating ESG factors into investment decisions? Can they make a material difference to investment performance? And just how do investors go about holding their investment managers to account for integrating ESG strategies into the investment decision process?
MSCI ESG Research aims to address questions and runs a range of thought leadership activities to evaluate how ESG factors can potentially add financial value or mitigate risk across an institutional investment portfolio:
- ESG Integration across Asset Classes - A Synopsis and Review
- ESG Integration across Asset Classes - Fixed Income
- Global Sustainable Government Bonds Strategy for LGS in Australia
- ESG Leadership Forum - A Success
- The business case for ESG in institutional investment - The RI/MSCI round table debate
- Boersen-Zeitung article: Nachhaltige Investments spielen immer grossere Rolle
- Remy Briand’s strategy for MSCI ESG Research and ESG Integration
- MSCI’s Research Insight and RCM’s Whitepaper on effective ESG Integration
- How the Asset Management Industry Integrates ESG
- FTfm video interview with Remy Briand, Global Head of Index and ESG Research, at MSCI
- MSCI, PRI, Towers Watson and RI webcast on ESG Integration strategies
- How MSCI ESG IVA facilitates ESG integration
To find out more about MSCI ESG Research's products and services, contact ESG Client Service.