Responsible Investing Around the World


It seems everyone in the asset management industry is talking about responsible investing and the importance of ESG (environmental, social and governance) issues.

Over the years, ESG has come a long way in terms of capturing investor attention. From something that was considered marginal, it has become a central tenet of modern active management.

However, ESG can look very different around the world. Different regions have embraced ESG principles in varying ways, while ESG terminology may be open to interpretation.

We asked our experts to review what has been happening inside the biggest markets in which we operate. The tour will take us across developed and emerging markets. It will identify the progress made, as well as the obstacles faced, as markets follow different paths on their ESG journey.

Each market has something to contribute. This makes it all the more valuable for investors everywhere to have an overview of how ESG is evolving from a global perspective.

What is ESG?

As recently as two decades ago, so-called ‘socially responsible investing’ (SRI) funds were the only vehicles available to the majority of investors who wanted to invest in an ‘ethical’ manner.

These funds screened out companies whose activities were deemed unacceptable. They also sought out firms that upheld certain principles. These were principles advocated by the likes of the International Labour Organization (ILO), which protects workers’ rights, and the United Nations Global Compact, which encourages businesses to adopt sustainable and socially responsible policies.

This type of screening, an effective way to meet the specific needs of investors, is still used. However, the market has evolved. It has moved towards, to some extent, looking at the broader medium- and long-term ESG risks and opportunities associated with investments.

Clearly, a wide variety of methods and approaches must be used to achieve this. But at its heart, ESG analysis is about understanding all aspects of an investment and, once invested, being an active owner.

Many asset owners want to be more engaged in the investment process. They want to have more than just a financial return to show from their investment choices.

We consider ESG analysis to mean a holistic assessment of all the key material ESG risks and opportunities associated with an asset. These must be treated as equal and integral components of the investment decision-making process.

Definitions and applications

  • ESG integration – the examination and assessment of key material environmental, social and governance risks and opportunities, which are included either qualitatively, quantitatively, or both, in the fundamental investment process.
  • Engagement – on-going interaction with companies, sometimes as part of a mainstream investment process that may, or may not, include ESG integration. Engagement can focus on specific ESG-related issues or be employed more generally to help understand where an investment is heading from different perspectives.
  • Screening (includes negative, positive, best-in-class, norms-based) – screening is binomial in nature. Assets are either in or out, based on screening parameters that are ideally well-defined and measured.
  • Thematic – looking at specific areas such as carbon emissions, wind farms, etc. Investment decisions are made based on the relevance to the underlying sustainability-related theme.
  • Impact – this specifically targets measurable environmental and social impact, alongside financial returns; assets must meet investment criteria as well as additional requirements (sometimes linked to the United Nations’ Sustainable Development Goals or other social and/or environmental criteria).
  • ESG improvement – a criteria or screening-based approach where the overall ‘ESG metrics’ of an asset are monitored for improvement.
  • Ethical (values) investing – investment process incorporating particular ethical or religious values that prohibit investments in certain types of companies.

What does responsible investing look like around the world?

Let’s take a closer look at the drivers and manifestations of responsible investing across the globe. The intention is not to create some sort of ranking.

Instead, our goal is to examine different approaches and to understand the obstacles that investors face. The ultimate purpose is to review and share best practice.

We’ll look at trends in Asia, Australia, global emerging markets, North America, the United Kingdom and continental Europe, highlighting some jurisdictions in more detail.


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Jerry Goh
Investment Manager, Asian Equities

Bill Hartnett
Stewardship Director, Corporate Governance

Fiona Manning
Investment Director, Global Emerging Markets Equities

Fionna Ross
Senior Analyst, Responsible Investing, Equities, North America

Mike Everett
ESG Investment Director

Rosie French
ESG Analyst, European Equities



Chapter 1

Asian companies have been slower than their counterparts in other parts of the world to integrate environmental, social, and governance (ESG) concepts into their business strategy. But there are signs that this is changing for the better.

About a decade ago, companies were generally surprised when we discussed ESG issues that affected their business. Many could not appreciate the impact on their costs, or identify the opportunities to profit from broader ESG trends.

We have seen ESG awareness build momentum. Asset owners and asset managers are showing more interest and putting pressure on companies.

Since then, we have seen ESG awareness build momentum. Asset owners and asset managers are showing more interest and putting pressure on companies. For example, Japan’s Government Pension Investment Fund (GPIF) announced its intention to increase allocations in ESG-related investments to 10% from 3%.1 This amount is worth some US$29 billion, sufficient to influence corporate behaviour.

Fund managers have been signing up to internationally recognised agreements, such as the United Nations-supported Principles for Responsible Investment (PRI), to demonstrate their commitment to ESG tenets. In Asia specifically, the signatory base grew by some 20% to 339 in 2019 from a year earlier.2

Chart 1: UN PRI Asian signatories, 2017-2019

Source: UN PRI Annual Report 2019

Regulators are playing their part as well. The Singapore Exchange (SGX) introduced sustainability reporting for listed companies on a ‘comply or explain’ basis in 2016.3 Hong Kong Exchanges and Clearing (HKEX) is seeking views to strengthen ESG rules through a consultation paper.4

Meanwhile, industry groups such as the Asian Corporate Governance Association (ACGA) provide platforms for ESG conversations between stakeholders through periodic conferences and other events.

Companies are now more fluent in the language of ESG, demonstrating evidence of ESG integration within their strategies and adopting more robust governance practices.

However, new issues have emerged. For instance, there is insufficient transparency around materiality assessment – identifying financial implications – and confusion over disclosure of relevant ESG-related data.

Materiality assessment should be bespoke because companies are not all the same. Each company has its own unique set of material risks and opportunities. The best firms can identify, prioritise and mitigate risks, while seizing opportunities.

Environmental and social issues have always been difficult to address in Asia, if only because of a lack of reliable data. Robust and relevant data allow investors to better understand a company’s progress towards understanding and mitigating ESG risks.

Companies here, like elsewhere, need to avoid superficial adherence to ESG principles. A one-size-fits-all list of ‘achievements’ may look impressive for corporate social responsibility purposes, but a ‘box ticking’ exercise helps nobody in the long run.

We have seen ESG awareness build momentum. Asset owners and asset managers are showing more interest and putting pressure on companies.


Chapter 2

Australia is one of the pioneers of ESG integration. The adoption of ESG analysis was fuelled over the past decade by the country’s superannuation pension funds, known as ‘super funds’. Work-related industry super funds, which have their roots in the trade union movement and are mutual profit-for-member organisations, have been especially influential.

Australia has had legislated compulsory superannuation salary contributions (currently set at 9.5% of all wages) since 1992. This has created the fourth-largest pool of retirement savings globally of some US$2.2 trillion, as of end-June 2019. The super funds are now very large and employ sophisticated investment strategies which include advanced levels of ESG integration and active ownership.

The local investor community has a strong awareness of the risks and opportunities linked to climate change.

The launch of the UN-supported Principles for Responsible Investment in 2007 provided a platform for Australian super funds to develop frameworks and policies for ESG integration. Domestic responsible investing groups were set up, such as the Australian Council of Superannuation Investors, the Investor Group on Climate Change and the Responsible Investment Association of Australasia. These groups are now well established, offering investment advice and policy advocacy around ESG themes.

Initially the focus of ESG efforts in Australia was primarily on corporate governance-related issues. Australia was an early adopter of proxy voting and engagement as important components of the investment process. Investors have ready access to company executives, boards chairs and non-executive directors. This is because of the large holdings of super funds in locally-listed companies (usually 20%-25% for most funds). The relatively small size of the Australian Securities Exchange, with its large overweight to banks and mining stocks, also helps.

In 2011, the introduction of the ‘two strikes’ legislation added greater significance to the engagement process. Shareholders got the chance to vote out the board of directors if votes against executive remuneration plans exceeded 25% in two consecutive annual general meetings.

The Australian market, on the whole, has supported the idea of long-term investing, which is a key component of ESG integration. With that in mind, interest in environmental and social issues – the ‘E’ and ‘S’ in ESG – has also developed.

The local investor community has a strong awareness of the risks and opportunities linked to climate change. This is a critical issue given the economy’s reliance on fossil fuels and commodities exports. The country is also susceptible to drought, extreme heatwaves and flooding.

Meanwhile, Australia’s Modern Slavery Act, which took effect in January 2019, requires companies to report on their exposure to the risk of modern slavery within their own businesses.5 They also need to identify potential risks within their supply chains. This is one part of a greater push by investors for more transparency and ESG reporting. Yet somewhat counter-intuitively, Australian companies still lag behind their peers elsewhere in terms of ESG data reporting.

Investors in Australia, as elsewhere, find increasing value in this type of information and expect companies to be more forthcoming.

Today, investment processes that incorporate ESG analysis account for more than half of assets under management in Australia. This market is the world’s second-largest behind Europe.6

Behind this trend is pressure from the super funds on their external fund managers and asset consultants for better quality sustainable investment options. Another notable trend, one that is global, is the increased interest of millennial investors in responsible investing.

Chart 2: AUM employed in primary strategies (A$bn)

Source: Responsible Investment Benchmark Report, Responsible Investment Association Australasia (2019)
The local investor community has a strong awareness of the risks and opportunities linked to climate change.

Global emerging

Chapter 3

ESG integration within the global emerging markets (GEM) has mostly been a tale of catch-up over the past 20 years. But the broader emerging market landscape, as in Asia, has started to change.

Two decades ago, companies in most emerging economies didn’t appreciate that investors were interested in receiving more non-financial information on their businesses. Corporate social responsibility-style reports were infrequently published in English, if at all. Conversations with investor-relations executives on anything other than balance sheet items were almost impossible.

In general, the biggest barrier for foreign institutional investors has been language. Many companies do not translate what ESG-related information they do provide into English.

However, companies began to realise the value in better explaining their activities to investors. Initially, the focus was on highlighting philanthropic activities and actions that benefitted the environment. As investors began asking more probing questions, the highest profile companies developed ever glossier marketing materials. It wasn’t until the last few years that GEM companies have started to publish relevant ESG-related data more in keeping with global best practice.

The reasons for slower ESG developments are fairly straight-forward but multi-faceted. They vary on a country-by-country basis.

In general, the biggest barrier for foreign institutional investors has been language. Many companies do not translate what ESG-related information they do provide into English. One solution is to hire investor relations teams who can converse fluently on ESG topics, and to do so in more than one language.

A second hindrance has been an inadequate supervisory structure or organisation within these markets. This impedes the ability of emerging markets to function and communicate in a way that investors in more developed markets expect.

This is most obvious, perhaps, in voting practices. Some emerging markets fail to adhere to the principle of equality of economic and voting rights (i.e. one share, one vote). Many do not have formalised systems to administer the voting process which properly account for the needs of foreign investors to vote by proxy.

A lack of appropriate infrastructure has also taken its toll in terms of government control and regulation. In India, for example, cement companies have been allowed to take a more relaxed view on environmental practices than global peers, particularly on carbon emissions. Employee health and safety can also be problems.

In cases of factory explosions and employee injuries or fatalities, some companies might incur small fines, at best. At worst, these accidents would go unnoticed, due in part to disorganisation or corruption across multiple levels of government.

A similar story can be found with ‘big oil’ in Latin America. The rise and fall of health and safety data coincided with the amount of money and attention a company invested in its employees. As governments lose control and regulations are not observed, there can be considerable fallout that comes at the cost of employees’ lives. Other casualties may include asset, revenue or profit erosion.

Emerging markets, while being the driver of much of the world’s revenue expansion, have struggled to balance the needs of profitable growth to drive economic and social development, and changing expectations around the environmental and social impact. This is the third hurdle.

In Indonesia, for example, plantations faced a wake-up call from investors in the mid-2000s over palm oil production practices. Deforestation was rampant and the treatment of day labourers a source of great concern. Certification programmes, such as the scheme developed by the Roundtable on Sustainable Palm Oil (RSPO), were created to help provide some degree of oversight. Investors are increasingly demanding evidence of greater compliance with best practice.

Better ESG standards require continued evolution in the minds of investors which will, in turn, shape their expectations of the corporates they invest in. We see evidence of that taking place as governments and leading companies see the light. There is money to be made in green energy, in upholding certain environmental and labour-related standards, and in providing data that investors ask for.

It is a slow process, but it is happening. As in every market, the first step is education, followed by tentative steps by companies to provide better data. This data is improved by a robust feedback loop. Banks and financial groups are also jumping on board, weighing up ESG-related factors when determining whether to lend and how to price loans.

Carbon footprint, human rights and diversity are emerging as big themes that will encourage a basic box-ticking exercise to meet minimum standards. However, this should evolve into deeper, more granular analysis as the conversation between companies and investors progresses. More engagement will encourage companies to provide greater transparency with regards to their activities.

Exchanges should also do more to ensure listed companies improve the quality of reporting on ESG-specific issues.

Chart 3: Novo Mercado - Brazilian company listings

Source: Bloomberg, August 2019
In general, the biggest barrier for foreign institutional investors has been language. Many companies do not translate what ESG-related information they do provide into English.

North America

Chapter 4

Canada and the United States have followed different paths with regards to ESG integration.


Canada and the United States have followed different paths with regards to ESG integration.

Canada has followed a similar path to the one taken by the UK and Australia. Asset managers, asset owners and trustees are required by regulations to consider key risks and opportunities when making investment decisions and hiring managers.

In January 2016, the province of Ontario started requiring pension funds to disclose whether ESG-related factors are part of investment policy statements. This applied to occupational public defined benefit pension plans and member-directed defined contribution schemes.

Under this law, scheme trustees must assess how ESG integration will affect their funds’ investment returns, if at all. They also must ensure that statements of investment policies and procedures contain ESG-related information.7

Crucially, the law does not require funds to make ESG-friendly investments. It was designed to raise awareness of potential, material ESG-related issues, rather than dictate how to invest.

While Ontario remains the only province in Canada with such legislation, interest from Canadian investors in governance, diversity and climate change has grown substantially. Now some 91% of institutional investors think about ESG when voting their proxies.8

Overall, the ESG investment landscape is evolving quickly across Canada. Many parties are not only interested in furthering ESG awareness, but also in pushing companies to publish more, as well as more reliable, ESG-related data.

As in the UK and Australia, asset managers are expected to report regularly to asset owners on ESG matters. This may be in the form of ESG-related engagements with companies and on positive outcomes from those interactions.

Certainly, there remains an element of screening or adjusting portfolios in line with themes, such as carbon reduction or diversity and impact.

But at its heart, ESG practices have moved past the initial stage of information gathering and scepticism. These issues have become an intrinsic part of Canadian investors’ thinking.

United States

The US has followed a different ESG path from its northern neighbour. In the 1980s, the US was very much a centre of ‘socially responsible investing’ (SRI). This provided mostly values-based negative and positive screening for clients. These investors wanted assurances that their funds were either avoiding certain activities or sectors, or upholding certain standards.

Purposeful screening wasn’t new even in the 1980s. Its roots can be traced back to Scotland in the 1700s when the Quakers wanted to avoid investing in companies that used slave labour. The first specialist ESG indices were developed in the 1990s to track a handful of US companies.

During the first decade of the new millennium, ESG integration became more mainstream in the rest of the world. But the US was slower to make the transition. The belief that a SRI style of investing is overly negative (due to the use of negative screening) weighed heavily on the psyche of US investors. So did the belief that it leads to reduced returns. US companies have been slower to publish ESG-related data, partly due to concerns about the implications within a notoriously litigious society.

That said, the Sustainable Accounting Standards Board (SASB) has worked since 2011 to create common standards for corporate filings to the US Securities and Exchange Commission (SEC). However, the SEC itself has not officially stated that companies should include material ESG-related data in their reporting. This is despite pressure from investors who want information that allows like-for-like comparisons between companies in the same sector.

As with other parts of the world, there are also problems with ESG terminology. The US has developed a unique solution. Increasingly, US investors are using the term ‘impact’ to mean everything from ESG integration, to engagement, to screening.

This all-encompassing definition of ‘impact’ is a double-edged sword. It confuses investors when trying to understand what a fund really does. But it can also simplify and ease the transition from SRI to ESG integration, as people are already familiar and comfortable with related concepts.

We do see some progress. A 2018 Morgan Stanley survey showed the majority of US-based asset managers consider sustainable investing as a ‘strategic business imperative’. Some 62% of asset managers believe it is possible to maximise investment returns while investing sustainably.9

Today, the managers of some US$12 trillion (around a quarter of US assets under professional management) consider some sort of sustainability element as part of the investment process.

Chart 4: SRI/ESG invested assets, 2012-2018

Source: Citi Research, GSIA
Canada and the United States have followed different paths with regards to ESG integration.

United Kingdom

Chapter 5

The UK, like Scandinavia, Australia and Canada, has a long history of considering environmental, social and governance (ESG) risks. This is a market that has been integrating ESG analysis into investment decisions for some time.

In the UK, the collapse of Polly Peck, BCCI and the Mirror Group led to the publication of the Cadbury Report in 1992. Regulators saw the link between corporate failure and poor governance. Here, the seed for an idea – the UK Corporate Governance Code – was planted.

Asset managers in the UK need to continue integrating ESG factors into their decision making and create innovative, sustainable products. The materiality of the risks, as well as the expectations of clients, policymakers and society, demand it.

Further corporate failures in ensuing years led to more reviews. These included the Greenbury Report in 1995, which shone a spotlight on corporate remuneration. There was also the Hampel Report in 1998, the Turnbull Report in 1999, as well as the Higgs Report and the Smith Report, both in 2003.

Meanwhile, the Myners Report in 2001 examined the activities of institutional investors, particularly their willingness to invest in private companies.

While corporate failures focused investors’ minds on governance risks, attempts to hold companies and their boards to account developed throughout the noughties. These culminated in the 2010 UK Stewardship Code. This emerged from the code of responsibility for institutional investors of the Institutional Shareholders’ Committee (ISC).

The 1990s also saw increased retail client-demand for funds which screened potential investments on ethics-based criteria. Most used a ‘negative’ screen to remove companies from the investment universe, on the basis that they did not meet the required ethical standards.

The following decade, investors became more aware of the materiality – or financial implications – of broader ESG-related risks that impact business performance. This brought about significant changes such as the development of so-called ‘sell-side’ analysis relating to ESG from the likes of investment banks and stockbrokers. Other developments included the creation of ESG-influenced indices and the development of ESG-sensitive investment mandates.

Around the same time, investors – asset owners and asset managers – began to form groups to promote and develop ideas for investing in a manner that would encourage sustainability and social investment. One example is the UK Social Investment Forum, set up in 1991, which developed into the UK Sustainable Investment and Finance Association (UKSIF). Another is the London-based Carbon Disclosure Project (CDP) which was established in 2004.

There was also a push to define standards against which the activities of investors and companies could be measured. Some of the most significant were developed under the auspices of the United Nations. The UN was responsible for the UN Global Compact (2004) and 2007’s Principles for Responsible Investment (PRI).

In the UK, some asset owners and asset managers sought to calibrate their activities against these standards. That’s why they joined industry groups promoting sustainability-friendly investment policies. The use of such standards has continued to develop, even as additional standards and policies are added.

Around the world, there has been an acceleration of policies to assist in the transition to a low-carbon economy. Other policies were designed to influence companies through the flow of capital within the financial system. Since 2015, the UN’s 17 Sustainable Development Goals (SDGs) have provided further guidance.

The journey towards the current state of ESG integration has been a long and winding one. It has changed the activities of asset owners, asset managers and the wider UK financial services industry. It has also become clear that the materiality of ESG risks, and the influence of capital flows on companies, are significant.

Asset managers in the UK need to continue integrating ESG factors into their decision-making and create innovative, sustainable products. The materiality of the risks, as well as the expectations of clients, policymakers and society, demand it.

Image credit: Sam Gellman Photography/Getty Images
Asset managers in the UK need to continue integrating ESG factors into their decision making and create innovative, sustainable products. The materiality of the risks, as well as the expectations of clients, policymakers and society, demand it.


Chapter 6

Europe has had a long, deep and uneven relationship with ESG analysis over the past three decades. As a region, it helped fuel the development and use of screening, making the process a core component in European responsible investing.

Screening is a process that remains at the heart of ESG today, even in the most sophisticated products and funds. Specific sectors, such as tobacco and weapons, as well as violators of human and labour rights, are blacklisted. Also popular are norms-based screens to ensure that investee companies are upholding universally accepted principles, such as those of the United Nations Global Compact.

Europe has had a long, deep and uneven relationship with ESG analysis over the past three decades.

One of the most influential managers in Europe is Norges Bank Investment Management, Norway's sovereign wealth fund. It excludes companies that don’t meet guidelines set by Norway’s Government Pension Fund Global. Divestment recommendations are made by a Council of Ethics, which is appointed by Norway’s Ministry of Finance. Decisions are often followed by other Scandinavian and European public pension funds.

Norway grew its considerable sovereign wealth fund from the country’s oil and gas reserves in the North Sea. More recently, this has been the cause of some soul searching. In fact, officials running the government pension fund have announced plans to sell off oil and gas exploration assets. It will only retain those oil and gas companies that invest in renewable energy and low-carbon technologies.

Scandinavia has, for some time, been considered the most advanced region in the world for ESG integration. This is due, in part, to the fact that many ESG-related norms permeate Scandinavian culture and society. These include strong state support for higher education, equality, and universal health coverage.

While taxes are among the highest in the world, the social benefits are unparalleled. These concepts have long been reflected in the way Scandinavian investors behave and are embedded in their investment philosophy.

Today, impact investing – investments that target measurable environmental and social impact – is at the forefront of Scandinavian investor interest. How to measure this impact has become a new science.

That said, the region still clings to screening practices that have long formed the backbone of responsible investing. Adherence to the UN Global Compact and exclusion of companies tarred by long histories of controversy remain a firm belief for Scandinavian investors.

Over in France, the equivalent of SRI, or ‘ISR’ (l’Investissement Socialement Responsable), has been dominated by social issues. This reflects the country’s concerns for labour and the environment.

For example, Duty of Vigilance 2017 requires companies to have good oversight of their operations and supply chains. Companies must comply with health, safety, environmental and human rights obligations.

Consultants steer large public pension funds to select managers who use a ranking in these areas to demonstrate their adherence to sustainability.

More recently, France has been at the epicentre of climate change legislation. In 2015, France passed an Energy Transition Law. Article 173 requires institutional investors to report on both the physical and transition risks faced by their assets.10 It was the first law of its kind.

In December that year came COP 21, also known as the 2015 Paris Climate Conference. COP 21 aimed to achieve a universally binding legal agreement on emissions – the Paris Agreement – to limit global warming to within 2°C from pre-industrial levels. In 2016, 174 countries signed up to the agreement and put it into their legal frameworks.

So far, France is the one place in Europe that has taken a specific stance on carbon with regards to investors’ requirements to report carbon exposure. The country is not only making a lot of noise but also passing legislation around carbon reporting, especially where this relates to public pension funds.

By contrast, other parts of Europe such as Germany, Italy and Switzerland, have been slower to embrace ESG integration. There are regional bodies, such as Swiss Sustainable Finance, which promote the role of ESG in investing. But, on the whole, while these jurisdictions have retained screening, we haven’t seen much investor interest in integrating ESG into investment processes, or in issues such as climate change.

Part of the reason for this could be a lack of data to support the positive correlation between ESG issues (such as diversity, health and safety) and investment returns.

It could also be down to a lack of expertise around shareholder engagement on ESG-related issues. Another problem could be an inability to effectively incorporate ESG considerations into an investment process. It could even be due to the general atmosphere in Europe right now where divisive political issues, such as immigration, have polarised public opinion.

Whatever the reason, ESG integration in these jurisdictions tend to lag behind Scandinavia and France where sustainability issues are treated more seriously. That said, they are still more progressive than many of their counterparts elsewhere in the world.

ESG legislation is changing the investment landscape across Europe. Upcoming laws will affect what happens in the UK, even with Britain leaving the European Union. These new rules may help close the gap between leaders and laggards by providing uniformity and consistency.

The European Union (EU) is developing disclosure legislation which will, amongst other things, require institutional investors to explain how ESG-related issues are integrated into investment processes. Investors need to disclose how these issues, such as climate change and social risks, affect investment decisions, as well as potential returns.

Under this legislation, asset managers will need to be more careful about labelling their funds as ‘sustainable’. This is in part to avoid ‘greenwashing’ – marketing products as sustainable when they are not. EU proposals will establish a voluntary framework defining ESG-related terms. That means ‘sustainable’ investment funds will need to meet certain criteria in order to be EU-approved.

The Shareholder Rights Directive II (SRD II) came into effect in June 2019. It requires fund managers to be more transparent with regards to their corporate engagement policy and to increase transparency on their proxy voting decisions.

SRD II also requires custodians and intermediaries, such as third-party research providers and proxy voting platform providers, to communicate more openly and in a timely manner with investors.

Chart 5: Global sustainable investing asset allocation, 2018.

Note: Other includes hedge funds, cash/deposits, commodities, infrastructure, and not otherwise specified.
Asset allocation data were not collected in Australia/New Zealand.

Source: Global Sustainable Investment Review (2018), Global Sustainable Investment Alliance
Europe has had a long, deep and uneven relationship with ESG analysis over the past three decades.

Digging deeper:
ESG legislation around the world




The stated goal of this paper is to review and share ESG best practice from around the world. Here are our key observations:

ESG analysis has evolved beyond screening, even though screening remains at the heart of ESG in many jurisdictions.

The market has moved towards looking at the broader medium- and long-term ESG risks and opportunities associated with assets. At its heart, ESG analysis is about understanding all aspects of an investment and being an active owner once invested. Materiality assessments should be bespoke.

Honest self-reflection and transparency are also important to finding solutions. In the UK, a number of corporate failures since the 1980s led to a series of public enquiries that identified various corporate governance inadequacies. While the measures taken in light of these enquiries do not offer a panacea, they do make it harder to repeat the same mistakes.

An initial commitment from the top can help kick-start much needed change and establish a framework for further development. This could be the EU’s plans to force institutional investors to explain how ESG issues affect investment decisions and potential returns. Or its efforts to establish a system to standardise ESG-related terms.

Asset owners are critical agents of change. In Australia, the adoption of ESG was fuelled by the country’s superannuation pension funds. Japan’s Government Pension Investment Fund (GPIF) will influence asset manager behaviour with its plan to increase allocations in ESG investments. Norway’s Norges Bank Investment Management, at the vanguard of ethical investing, affects the investment decisions of public pension funds elsewhere in Europe.

Companies are under pressure to meet the changing expectations of policymakers, asset owners, and indeed, public opinion. Clearly the extent of this varies across jurisdictions, but this is most noticeable in the more progressive markets. In Canada, for instance, many investors are demanding that companies provide reliable ESG data in greater detail and volume.

That said, the quality of ESG data can vary. The absence of standardised reporting makes life difficult for investors. Despite notable progress in the emerging markets, many companies do not routinely provide information in English. Investor relations officers there may not converse fluently in the language of ESG. Some companies still struggle with basic concepts of good governance, sometimes tolerating voting practices that place foreign investors at a disadvantage.

Finally, asset managers have a big role to play. Fund managers around the world have been keen to demonstrate their commitment to ESG tenets. One way to do so is by signing up to internationally recognised agreements such as the United Nations Principles for Responsible Investment (PRI). However, responsible investing cannot be a simple box-ticking exercise. A superficial nod towards compliance helps nobody in the long run.