A vast majority of large investors globally have shown a growing interest in using environmental, social and governance criteria to guide their investments, according to a survey released Monday by Morgan Stanley.
Eighty-four percent of the 118 public and corporate pensions, endowments, foundations and other large asset owners that were included in the study are either using ESG guidelines or considering using them in their investments, and 60 percent of those have developed this interest within the last four years, according to the survey. The study was conducted by the Morgan Stanley Institute for Sustainable Investing and Morgan Stanley Investment Management.
Seventy-eight percent of the asset owners who are interested in ESG said risk management was a factor in their interest, and 77 percent said a potential for returns is a top driver of their interest.
“As interest in sustainable investing continues to rise, we see investors pursuing a range of approaches with their assets,” Rui de Figueiredo, co-head and chief investment officer of the solutions and multi-asset business at Morgan Stanley Investment Management and head of the division’s Sustainability Council, said in a statement. “The growing sophistication among asset owners about when and how to integrate ESG into the investment process creates opportunities to tailor strategies and provide customized portfolio solutions that help investors meet their financial and impact goals.”
Despite the enthusiasm, there are still some hurdles standing in the way of ESG investing, according to the survey. Only 42 percent of asset owners feel they have the necessary tools to assess ESG investments and they say obtaining proof of performance remains a challenge. Investors also cited access to quality ESG data as a top concern, said Hilary Irby, co-head of global sustainable finance at Morgan Stanley.
“With this growing momentum in sustainable investing, third-party managers have an opportunity to increase implementation by improving reporting tools and education, and developing capabilities to align portfolios with owners’ unique objectives,” she added.