37% of U.S. advisers consider ESG factors in every portfolio

It’s a new year, and hopefully it will be less eventful than the last. For the majority of us, 2020 was definitely unusual, and most, I imagine, are glad it is over. Personally, I do not think I have used the word unprecedented so often!

Moving into 2021, the future is looking more positive. Each quarter Last Word Research tracks the forward-looking investment intentions of investors across the globe. Despite the events of 2020, our latest research reveals that most of our respondents have an optimistic outlook about the coming year.

But what are investors feeling most optimistic about?

Last Word Research, in collaboration with InvestmentNews' ESG Clarity US, has produced a 2021 global ESG report, “Competing in an ESG World: How far must fund managers go to embed ESG into their firms?” It tracks the changing attitudes toward ESG across the globe.

BEHIND THE CURVE

Looking at our U.S. audience only, our latest data highlight how important considering ESG factors are when it comes to fund selection. As you can see from chart 1, almost four in 10 respondents consider ESG factors for every portfolio.

Although ESG does not influence about 30% of American investors, the remaining fund selectors are all looking for some form of engagement with ESG from fund groups. This is a strong message to asset managers that wish to remain a player in this highly competitive industry.

With such a small number of respondents reporting to never consider ESG factors, on the surface this looks positive, and for the most part it is … however, compared to investors across the globe, the United States is behind the curve.

[For more impact investing news: Check out InvestmentNews' ESGClarityUS.com]

An impressive 61% of our global respondents reported they consider ESG factors for every portfolio, with only a handful never considering ESG.

MOST IMPROVED

However, when it comes to who has seen the biggest shifts in attitude in recent years, the U.S. is leading the way.

We asked our respondents how much they engaged with ESG relative to three years ago, and there has been a clear and significant shift among American investors.

As you can see in the above chart, more than three quarters of respondents reported to seeing clients putting more money into ESG strategies relative to three years ago. This is significantly higher than most other regions we surveyed, where on average only two thirds of respondents saw an increase in clients moving money to ESG strategies.

Also note, there has been an increase in demand for in-depth ESG reporting from fund groups. Simply put, our respondents want more proof. They want to see how you have integrated ESG into portfolios, where you had considered investing but didn’t, or what stocks you had previously ignored but are now interested in.

Transparency is key, and don’t just show where you have been successful but where you haven’t as well, ensuring you make as much data available to fund buyers as possible.

Remember, don’t say it, show it.

Our latest ESG report shows a real shift in appetite for ESG investing in the U.S. It is clear that sustainable investing is not just a passing fad, but here to stay and now is the time to make the most of this demand for ESG strategies.

[More: Biden signals administration will review DOL ESG rule]

If you are interested in the above data or would like to discuss our latest ESG report, “Competing in an ESG World: How far must fund managers go to embed ESG into their firms?” please contact [email protected].

Lottie McGurk is a quantitative researcher at Last Word Research.