Morgan Stanley: "Sustainable Investing has gone from a niche investment idea to attracting enough capital to start having an impact on global challenges at a meaningful scale. The intensity of recent growth has been driven by a fundamental shift in how investors and asset owners view environmental, social and governance (ESG) factors."
MS polled 118 asset owners.
- 84% of asset owners surveyed are at least “actively considering” integrating ESG criteria into their investment process
- 60% of asset owners integrating ESG into their investment process have only begun doing so within the last four years and 37% within the last two
(Me: This suggests movement is still in early days, though MS argue it is moving mainstream)
Source: Morgan Stanley (link)
-78% of respondents listed risk management as an important factor driving their adoption of sustainable investing.
-77% of respondents also focused on generating returns.
The link to the survey paper is here. It chimes with the CFA ESG survey I posted about previously.
I do think that answer that 37% of asset owners only started thinking about ESG in last 2 years suggests that this might still be the early days of the movement - and if asset owners eventually reflect the end beneficiaries, which for the most part is the "person n the street" and if she increasingly younger and more interested in sustainability, then the movement has legs...
Amel-Zadeh: ...ESG information is material to investment performance. However, which information is material likely varies systematically across countries (e.g. a country where water pollution is a more serious issue versus a country where corruption is a more serious issues), industries (e.g. an industry affected dramatically by climate change versus an industry affected by violations of human rights in the supply chain) and even firm strategies (e.g. firms that follow differentiation versus low price). For example, Khan et al. (2016) show that the vast majority of ESG data for any given industry is immaterial to investment performance and that the material information varies across industries within a sample of US stocks. Understanding how the materiality of ESG information varies across countries, industries and firm strategies therefore is of primary importance...”
This to my mind, along with this study on the benefits of Active Ownership and ESG engagement and if one puts this work together with the work on the outperformance of Global Equity managers described here, one can start to build a defense of Active Management for global managers for those using ESG....
If you'd like to feel inspired by commencement addresses and life lessons try: Neil Gaiman on making wonderful, fabulous, brilliant mistakes; or Nassim Taleb's commencement address; or JK Rowling on the benefits of failure. Or Charlie Munger on always inverting; Sheryl Sandberg on grief, resilience and gratitude or investor Ray Dalio on on Principles.
Cross fertilise. Read about the autistic mind here.