Asset Managers Increasingly Taking ESG Codes & Ratings Systems Seriously
As investors are increasingly exploring ways to pivot their dollars toward companies with strong ESG (environment, social, and governance) credentials, the world’s largest asset managers are working on ways to formalise the measurement and assessment of ESG impact.
According to shareholder advisory firm SquareWell Partners, the world’s top 50 asset managers are formally using sustainability codes and using the services of ESG ratings agencies to ensure the companies in their portfolios under management are living up to their ESG commitments.
These commitments of resources suggest ESG investing is quickly moving into the mainstream, with management companies no longer able to ignore or pay lip service to the ideas embodied in the notion of ESG as important investment indicators.
The United Nations Principles for Responsible Investment, (UN PRI), is the most prominent code used by asset managers. Some fund managers have developed their own codes for incorporating ESG factors into their investment decisions.
The signals augur well for a more sustainable world as we emerge from the COVID-19 crisis. When investor money begins to seek environmentally and socially responsible corporate behavior and sound corporate governance, companies will have no option but to seek to increase their ESG ratings.
And what was once a niche area of investing will become more and more normalised, with those ESG standards quickly becoming baselines. Asset managers have shown they are aware how important ESG factors are becoming to investors.
As ESG factors play a more pivotal role in attracting investment, the importance of measuring impact will increase. That pressure will only rise as ratings standards and codes mature, with fund managers unable to overlook ESG performance.
However, it is important that fund managers and ratings agencies don’t overlook the outsized role that outcomes play, as opposed to inputs. What will matter more to investors increasingly savvy when it comes to ESG performance is what outcomes and impacts companies are delivering.
The role of ESG pressures on corporations could become substantial in the years to come as we work to meet our climate goals.
Website | LinkedIn | Twitter | Medium | Telegram | OpenSea | YouTube
