Why and how investors use ESG information: Evidence from a global survey

Research Retrieved: June 2018
Retrieve the paper from Harvard University

Issue

What once used to be a new phenomenon, seems to be on the way to becoming mainstream: the use of ESG information by investment professionals. In a recent study, Amel-Zadeh & Serafeim (2017) survey traditional fund managers and consolidate their insights on how the industry makes use of non-financial information on environmental, social, and governance factors.

Key Findings

  • Financial materiality matters: Whereas only few respondents were concerned with potential conflicts between ESG integration and fiduciary duties, the authors find that most senior executives and managers (63%) consider ESG information as financially material.
  • One size does not fit all: In line with earlier empirical studies suggesting that only material ESG investments pay off, the consolidated responses support that which ESG dimensions are deemed most relevant clearly depends on the analysed industry.
  • What’s holding ESG back: Not only data issues, but also the limited comparability of ESG information across firms were disclosed as major impediments to a further acceleration of the ESG trend.

 

Practical Relevance

Since the commitment of traditional investors to the use of ESG information has seen rapid growth in the last year alone, this survey provides a helpful overview and lets managers and executives – instead of just the data – speak about what motivates them to evaluate ESG performance, and how the available information is currently used. Besides strategies and impediments, the study also surveys professionals’ expectations regarding future developments – for instance, negative screening is perceived to be most commonly used, but also commonly projected to be on a decline in the years to come.