Investment consulting firms polled by the Social Investment Forum said their clients are increasingly interested in environmental, social and governance investing (ESG). Fifty-six percent of respondents noted a growing interest among their clients in integrating ESG criteria in their investment policies over the last 12 months, and 88% expect growing client interest in the next three years.
Foundations, 401(k) plan sponsors and public pension funds are going to investment consultants for assistance in developing ESG strategies and selecting managers to execute them, said Meg Voorhes, deputy director and research director at the Washington, D.C.-based Social Investment Forum.
On a scale of one to five, those consultants’ clients are exploring ESG selection because they want to be known as responsible asset owners (3.5) and they want to fulfill their fiduciary duty to investors (3.1).
Advisers, therefore, “should feel empowered to raise this question with their clients,” Voorhes said. “They should realize that a number of investment consulting firms are becoming active in this space.”
Conducted in September, the survey polled 41 investment consultants at 40 firms that ranged in size from $100 million to more than $1 trillion in assets under management. None of the respondents’ companies were especially ESG oriented, and the proportion of ESG specialists represented among the different firms’ staffs varied considerably.
Respondents were cautious about bringing up ESG issues with their clients, according to the study. A majority of respondents (71%) said they discuss ESG only when asked about it. Only 22% said they raise the issue regularly when meeting with clients. One reason for the reticence is that some advisers want more data on ESG strategy performance, by asset class, over longer periods of time.
Several respondents suggested in written comments that their firms needed to educate in-house staff on ESG issues to better cater to the growing demand from U.S. investors.