Some 84 per cent of global institutional investors said they’re pursuing or considering pursuing the integration of environmental, social and governance factors into their investment processes, according to a survey by the Morgan Stanley Institute for Sustainable Investing and Morgan Stanley Investment Management Inc.
The survey, which polled 118 global public and corporate pension plans, endowments, foundations, sovereign wealth entities and insurance companies, found 60 per cent of respondents began integrating environmental, social and governance factors in the last four years, while 37 per cent began doing so just two years ago.
The majority of global investors also view sustainability as a driver of risk management and returns, with 78 per cent of respondents rating the former as an important factor driving sustainable investing and 77 per cent saying the potential for return is important.
As well, 77 per cent of respondents agreed they have a responsibility to address sustainability through their investments. However, investors found a number of challenges, such as proof of market-rate financial performance (cited by 24 per cent of respondents). Only 42 per cent said they have adequate tools to assess sustainable investments.
Where investors do have access to tools, 75 per cent said they rely most heavily on in-house research to support such investments, with 73 per cent turning to third-party specialty resources. However, those survey participants that aren’t happy with the tools available felt that reliable third-party data would be most helpful for assessing the alignment of investments with sustainability goals. Indeed, the majority said they’re looking for mainstream third-party data providers (67 per cent), specialist third-party research (57 per cent) and third-party ratings, rankings and indexes (57 per cent). Only 35 per cent of respondents felt developing in-house research would be most helpful for their organizations.
With better tools, information and training, interest in sustainable investing is on track for continued growth, the survey noted. Although 16 per cent of respondents described a lack of knowledge as their biggest challenge to adopting environmental, social and governance practices overall, 84 per cent said they want to learn more about at least one approach to sustainable investment.