A majority of our recent webinar participants (62%) think it makes sense to incorporate environmental, social, and governance (ESG)  into investment decisions, according to a June 2017 William Blair poll —and industry surveys highlight significant growth in ESG adoption by both asset owners and consultants.

The chart below illustrates that U.S. plan sponsor signatories to the Principles of Responsible Investment (PRI) grew by approximately 70% over the past 5 ½ years, while U.S. consultant signatories nearly quadrupled.

This is corroborated by the following chart, based on survey data from Callan, showing that U.S. plan sponsor incorporation of ESG factors grew approximately 70% over the past 4 years.

Breaking ESG incorporation down by plan type, the Callan survey results are not surprising: endowments and foundations have the highest rate of incorporation at about 50%, followed by corporates at about 30% and public funds at about 22%. That is generally consistent with what we see among our client base.

From a geographic perspective, our European clients are more at the forefront of the ESG movement, although we are seeing increasing interest and activity among our U.S. and Canadian clients as well.

The momentum behind ESG integration has been supported by recent guidance from the U.S. Department of Labor clarifying that ESG factors are not inconsistent with fiduciary duty. This has effectively removed what had been a barrier to broader consideration of ESG by pension plan sponsors.

The big question, however, is, “Why does it matter in the first place?” In other words, does ESG have any impact on performance?

The consensus seems to be that ESG considerations are important to mitigating risk and volatility. But we are also seeing increasing evidence that ESG also provides an alpha-enhancement opportunity.

For example, a 2015 Harvard study concluded that materiality is very important—in terms of driving corporate performance, as measured by return on capital.*

In future posts, we’ll discuss approaches to implementation, and describe our ESG journey at William Blair.

*Mozaffar Khan, George Serafeim, and Aaron Yoon; “Corporate Sustainability: First Evidence on Materiality”; Harvard Business School; March 24, 2015.

 

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Please carefully consider the Funds’ investment objective, risks, charges, and expenses before investing. This and other information is contained in the Funds’ prospectus, which you may obtain by calling +1 800 742 7272. Read it carefully before you invest or send money. Investing includes the risk of loss.

Any statements or opinions expressed are those of the author as of the date of publication, are subject to change without notice as economic and markets conditions dictate, and may not reflect the opinions of other investment teams within William Blair Investment Management, LLC or the Investment Management Division of William Blair & Company, L.L.C.

This content is for informational and educational purposes only and not intended as investment advice or a recommendation to buy or sell any security. Investment advice and recommendations can be provided only after careful consideration of an investor’s objectives, guidelines, and restrictions.

Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Investments are subject to market risk. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be interpreted as investment advice, as an offer or solicitation, nor as the purchase or sale of any financial instrument. Statements concerning financial market trends are based on current market conditions, which will fluctuate.

William Blair does not provide legal or tax advice. Please consult your tax and/or legal counsel for specific tax questions and concerns.

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Copyright © 2017 William Blair & Company, L.L.C. "William Blair” is a registered trademark of William Blair & Company, L.L.C. No part of this material may be reproduced in any form, or referred to in any other publication, without express written consent.

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Please carefully consider the Funds’ investment objective, risks, charges, and expenses before investing. This and other information is contained in the Funds’ prospectus, which you may obtain by calling +1 800 742 7272. Read it carefully before you invest or send money. Investing includes the risk of loss.

Any statements or opinions expressed are those of the author as of the date of publication, are subject to change without notice as economic and markets conditions dictate, and may not reflect the opinions of other investment teams within William Blair Investment Management, LLC or the Investment Management Division of William Blair & Company, L.L.C.

This content is for informational and educational purposes only and not intended as investment advice or a recommendation to buy or sell any security. Investment advice and recommendations can be provided only after careful consideration of an investor’s objectives, guidelines, and restrictions.

Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Investments are subject to market risk. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be interpreted as investment advice, as an offer or solicitation, nor as the purchase or sale of any financial instrument. Statements concerning financial market trends are based on current market conditions, which will fluctuate.

William Blair does not provide legal or tax advice. Please consult your tax and/or legal counsel for specific tax questions and concerns.

Distributed by William Blair & Company, L.L.C., member FINRA/SIPC.

Copyright © 2017 William Blair & Company, L.L.C. "William Blair” is a registered trademark of William Blair & Company, L.L.C. No part of this material may be reproduced in any form, or referred to in any other publication, without express written consent.

Statement of Financial Condition | NMS Rule 605 & 606 | Business Continuity Plan | UK Stewardship Code
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