While many investors say they apply environmental, social, and governance considerations in their investment processes, few actually include them in formalized product documents.
According to a report from Cerulli, most signatories of the Principles for Responsible Investment demonstrate ESG capabilities in public materials, like their websites. However, just 4.5 per cent of assets controlled by those signatories are described as taking ESG considerations into account in official product documents like prospectuses.
Money managers cited a lack of familiarity with ESG factors (26 per cent) as a major reason for their lack of inclusion in such documents. Other reasons included the perception that including ESG considerations can have a negative impact on performance (25 per cent) and difficulty defining the boundaries of ESG (25 per cent).
“Given these challenges, many asset managers shy away from documenting that ESG factors inform investment decisions,” said Michele Giuditta, a director at Cerulli, in a press release.
While the PRI have existed since 2005, U.S. asset managers signing on is a more recent phenomenon, with two-thirds having signed on in the past five years.
“We are in the beginning stages of adoption, with many firms just starting to build their ESG integration processes,” said Giuditta.