First-ever Typology Helps Investors Navigate Varied Approaches to ESG Integration

First-ever Typology Helps Investors Navigate Varied Approaches to ESG Integration

Report identifies key differences in ESG integration approaches among 70 profiled investors with $19.9 trillion in assets; classifies six prevailing ESG archetypes

Webinars on May 8th and 9th to Review Report Findings

NEW YORK, NY, April 25, 2017 – A new report examining how investors integrate environmental, social and governance (ESG) factors into their portfolios finds that investors are leveraging a diverse set of integration strategies. Based on an analysis of the investment practices of 70 institutional investors with total assets under management of $19.9 trillion, the report presents the first-ever typology for classifying the approaches that investors are taking to integrate ESG factors into their investment processes.

The report, How Investors Integrate ESG: A Typology of Approaches, classifies ESG integration approaches along three dimensions: management (who is integrating ESG), research (what is being integrated), and application (how the integration is taking place). Each dimension includes key differentiators — for example the degree of centralization of ESG functions within an organization, or the degree to which macro-level sustainability trends (as opposed to individual company ESG factors) are integrated – as the basis for distinguishing between approaches.

The report authors used the typology to identify six prevailing approaches of ESG integration in the market today: 1) The Believer, 2) The Cautionary, 3) The Statistician, 4) The Discretionary, 5) The Transition-Focused, and 6) The Fundamentalist. Commissioned by the Investor Responsibility Research Center Institute (IRRCi), the report is authored by ESG experts Kevin Ranney, Doug Morrow, Martin Vezér and Trevor David from Sustainalytics. Download the full report here.

To review the findings and respond to questions, there will be three webinars:

Monday, May 8, 2017

  • For North America (New York – 1 PM ET), register here.
  • For Europe (London – 1 PM GMT), register here.

Tuesday, May 9, 2017

  • For Asia Pacific region (Sydney – 10 AM), register here.

“While ESG factors are increasingly integrated into investment decisions, how that is being done varies considerably, and the market to-date has lacked an analytical framework to organize the full range of ESG integration techniques. This report provides that framework,” said Jon Lukomnik, IRRCi executive director. “The goal of this typology is to advance the dialogue around what ESG integration really means. Asset owners can use it to understand how asset managers consider ESG factors, and asset managers can use it to compare their approaches to their peers, and, if necessary, refine them.”

“The investment community’s growing use of ESG information has raised the importance of understanding how investors are addressing ESG factors in their investment processes,” said Sustainalytics’ CEO Michael Jantzi. “We are honored to have worked with IRRCi to support the development of this groundbreaking report and hope it will provide value to investment professionals and decision-makers.”

The report also includes several high-level observations about the current landscape for ESG integration, including:

  • Despite the continued groundswell of investor interest in ESG, limitations defined in investment mandates may be constraining ESG integration.
  • A growing number of large investors are paying increased attention to companies’ sustainability impacts and how these impacts may generate systemic risks that can jeopardize economic value.
  • Access to ESG research and public commitments to consider ESG issues do not necessarily ensure that ESG information is integrated into investment decision-making.

The Investor Responsibility Research Center Institute is a nonprofit research organization that funds academic and practitioner research enabling investors, policymakers, and other stakeholders to make data-driven decisions. IRRCi research covers a wide range of topics of interest to investors, is objective, unbiased, and disseminated widely. More information is available at www.irrcinstitute.org.

Sustainalytics is an independent ESG and corporate governance research, ratings and analysis firm supporting investors around the world with the development and implementation of responsible investment strategies. With 13 offices globally, Sustainalytics partners with institutional investors who integrate environmental, social and governance information and assessments into their investment processes. Today, the firm has more than 300 staff members, including 170 analysts with varied multidisciplinary expertise of more than 40 sectors. Through the IRRI Survey, investors selected Sustainalytics as the best independent responsible investment research firm for three consecutive years, 2012 through 2014, and in 2015 and 2016 Sustainalytics was named among the top three firms for both ESG and Corporate Governance research. For more information, visit www.sustainalytics.com.

Media Contacts:

Kelly Kenneally | +1.202.256.1445 | kelly@irrcinstitute.org | @irrcresearch

Sarah Cohn |+1.646.963.6944 | sarah.cohn@sustainalytics.com | @sustainalytics