Overview

This report defines what constitutes an environmental, social, and governance (ESG) investing framework and analyzes the various ways that asset managers and asset owners are incorporating ESG into their investment decision-making from both a product and process standpoint. The report not only assesses the true demand for ESG strategies among both client types, but also assesses which elements of ESG matter most to institutional and retail investors.

Key Themes

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The roster of ESG products continues to expand across asset classes and both public and private markets. Asset managers have been building out product lineups and are using a wider range of asset classes and vehicles to do so.

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Asset managers are also thinking more generally about the ESG policies and procedures they have in place and are enhancing their ESG integration approaches, proxy voting, and engagement activities. Current hot button issues for engagement activities include climate, board governance, equality, and labor standards. Amid the COVID-19 pandemic, asset managers are more deeply evaluating how companies’ current policies ensure employee health, safety, and economic well-being. Collaborative engagement continues to gain steam.

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A  growing number of institutions are updating their investment policy statement (IPS) to include language about ESG priorities, principles, and/or decision criteria. Asset owners that allocate to sustainable investment products remain committed to their allocations and continue to leverage the power of their investment portfolios to tackle some of the world's largest problems, such as climate change, inequality, racism, disease, and hunger, as well as investing in sustainable companies that are positioned for long-term success.

ESG: Perspectives from Asset Managers

Asset Managers: Anticipated Demand for ESG Strategies in the Next Two to Three Years by Generation, 2020

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Asset Managers: Themes of Impact Investment Strategies Offered, 2020

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Analyst Note: Other responses include multi-themed funds, natural resources, climate change, and gender equality.

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