Roughly two-fifths (38 per cent) of U.S. institutional investors say they incorporate environmental, social and governance factors into investment decisions, according to a new survey by Callan.
The survey — which polled roughly 90 institutional investors, including public and corporate defined benefit and defined contribution pension plans, as well as endowments and foundations — found while adoption of ESG factors has increased since 2022 (35 per cent), it decreased from 49 per cent in 2021, the highest rate of ESG adoption in the survey’s history. ESG adoption was highest among foundations (61 per cent).
Read: Survey finds fewer U.S. institutional investors incorporating ESG into investment decisions
Nine in 10 (92 per cent) institutional investors added ESG language to investment policy statements, making it the most common form of ESG integration. Roughly two-thirds (63 per cent) cited aligning portfolios with organizational values as the reason for ESG incorporation.
Notably, a third (32 per cent) of respondents included diversity, equity and inclusion as part of their ESG focus, almost triple the amount in 2022 (11 per cent).
Two-thirds (67 per cent) said they consider ESG factors with every investment/manager selection. Half (49 per cent) of institutional investors that aren’t incorporating ESG noted they won’t consider factors that are not purely financial in their investment decision-making.
“ESG adoption has increased since our first survey in 2013 and we observe a subset of investors taking further steps toward ESG integration at the total fund and implementation levels,” said Tom Shingler, senior vice-president and ESG practice leader at Callan, in a press release. “This is also a time of federal regulatory uncertainty and increased politicization of ESG. Callan continues to view ESG through an investment lens, rather than political, and partners with clients to meet their investment objectives.”
Read: Survey finds 75% of global asset managers have an ESG policy