Few U.S. pension plans integrating ESG into investment manager selections: survey

Very few American pension funds are incorporating environmental, social and governance issues, according to a new survey by NEPC Investment Consultants.

Just 12 per cent of participants said they’re incorporating ESG factors into their investment manager selection process, while 59 per cent said they aren’t and 29 per cent said they aren’t but they’re interested in doing so. The majority (70 per cent) of survey participants that are incorporating ESG factors are defined contribution plans.

Read: Investors cite returns, risk management as drivers for ESG integration

Among those that are interested but have yet to implement ESG in their manager searches, 37 per cent said they need more education and 32 per cent said they need data on how it affects performance. As well, pension plans sponsored by health-care organizations (62 per cent) are more likely than other corporate funds (38 per cent) to be interested in or to have integrated ESG.

Among plans sponsors that aren’t interested in ESG, 38 per cent said it was solely for financial reasons, while 27 per cent cited the need for more data. Defined benefit plans are especially uninterested in focusing on ESG, at 94 per cent, although 28 per cent of survey participants indicated they could be interested in the future. In searching for managers, defined benefit funds that haven’t integrated an ESG focus said they focus instead on risk/return metrics (59 per cent) and diversification (39 per cent). 

Read: BCI must take more action around environmentally issues: think-tank