The world’s largest and arguably most influential investors remain committed to sustainable investing but are less wedded to “ESG” as a term. At the same time, they are focusing more on the underlying process of sustainable investing and are treating “E,” “S” and “G” as individual components rather than the sum of the parts, according to qualitative insights gathered as part of the fourth annual Morningstar Voice of the Asset Owner Survey.
These new insights were gathered from direct interviews with 25 asset owners globally on a wide range of investment-related topics to lay the foundation for the firm’s fourth annual global quantitative asset owner survey, to be fielded in July and August with results to be shared in September.
Thomas Kuh, PhD – Head of ESG Strategy, Morningstar Indexes
“It’s impressive how asset owners continue to move the dialogue forward on ESG, how it is perceived, discussed and implemented in their global portfolios. In a time when ESG 'blowback' seems to be the prevalent narrative among the media and investors, asset owners seem less concerned about what ESG is called than how it is implemented. And, when it comes to implementation, they are applying more granular sustainable investment data across the range of asset classes in their portfolios.”
Asset Owner Voices on ESG as a Term:
Insurance Company (Nordics)
“We have also recently discussed with external experts—this rebranding of ESG maybe isn't all negative because when you use umbrellas such as ESG, sustainability, or CSR, there are thousands of different topics under them. ... Over time, if we start calling things what they are instead of putting them under labels like ESG, I think it can be good."
Public Pension Fund (US)
“When I started working ESG integration into investing more than a decade ago, my thinking was that it would just go away as a concept. Ultimately, we win the war when we don't need to say the letters ESG anymore, right? It just becomes part of good investing. Everybody knows that these risks are real, and they are going to pay attention to them. And whether or not they call it ESG—maybe management quality, community or associate engagement, positive brand image, etc.—portfolio managers have been incorporating this information into their security selection and portfolio construction, because we all know there are risks and opportunities out there.”
Asset Owner Voices on the Evolution of Sustainable Investing:
Public Pension Fund (UK)
“ESG does apply to our whole portfolio, the extent that it can be applied, of course, differed by asset class say, hedge fund, which is more difficult. But, we have had a conversation with all our fund managers—we asked them to basically apply to the extent possible. And I think here is where I can make a distinction between ESG and sustainability. I think sustainability is a bit more about the investment opportunities rather than just the risk. …There are sectors like infrastructure issues, which is by nature, more conducive for us to find sustainable investment opportunities in the infrastructure sector, say, compared to hedge fund. So, when it comes to ESG, it's applied across the whole portfolio. But when it comes to finding sustainable investment opportunities, we do focus on certain asset classes.”
Public Pension Fund (Canada)
“We’re also engaging on deforestation, working alongside other investors. Until now, much of the focus has been on climate change, but there’s growing attention on biodiversity—and the important systemic connection it has to climate-related risks.”
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