When it comes to environmental, social, and governance (ESG) investing, Europe has been light years ahead of North America. The 2014 Global Sustainable Investment Review noted that 58.8% of European invested assets at the time were invested in a sustainable way, compared to 31.1% in Canada and 17.9% in the United States. In July 2017, Schroders revealed that in its Global Investor Study of Institutional Investors, 58% of pension fund investors in Europe already see ESG as in important consideration—only 21% feel that way in the U.S.
ESG’s fate in North America, though, does finally appear to be taking a more positive turn. In a recent blog from Greenwich Associates, the author Christopher Dunn shares that ESG “is probably the most talked about topic in our recent conversations with investors, consultants, and managers.” To better understand the demand for ESG investments, Dunn and his associates conducted in-depth interviews with 150 North American institutional investors. Here’s how the numbers broke down:
- 27% of the investors currently use ESG strategies
- 28% do not plan to ever use ESG strategies
- 45% do plan to use ESG strategies in the future
The big takeaway from these results? It’s refreshing to see 45% of institutional investors saying that they’re planning to get involved with ESG. Dunn notes this “forecasts a seismic shift in attitude toward ESG and likely signals a wave of fresh demand.”
Morningstar has written that weakness in the retail ESG market is what bonds Europe and the U.S. together. ESG has had to fight the perception that socially responsible investing comes with a performance penalty, but hopefully that incorrect way of thinking will continue to change. According to Morningstar, “Academic and industry studies are demonstrating that sustainable investing does not underperform conventional investing, and there is mounting evidence that incorporating ESG factors in an investment process has a positive impact on performance.”
At Community Capital Management (CCM), we incorporate the environmental and social aspects of ESG investing into our impact investment philosophy. As the demand for impact investing rises among investors and advisors, we will continue to answer questions and concerns, and maintain our commitment to achieving excellent long-term results.