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How much actual ESG capital is invested in stocks? Q1'17 update

Updated: Sep 4, 2019

ESG Equity Market Monitor, March 2017 update

The Global Sustainable Investment Alliance (GSIA) has recently published its latest biennial market review valuing sustainable investment assets at $22.89tn globally. But is this figure truly indicative of the real dollars invested in ESG?
In our first quarterly update following the launch of Leaders Arena’s ESG Equity Market Monitor in December last year, we answer once more the question many IROs ask. How much capital invested in their companies can we truly categorise as ‘ESG’?

Headlines from our research this quarter:

  • The UK has overtaken Norway as the largest ESG market

  • The average ESG ownership in companies reached 8.0%, 13% YoY growth rate

  • Robust 21% growth in total ESG Equity Assets underpinned by the expansion of ESG integration among asset managers and the underlying stock market buoyance

Leaders Arena’s proprietary methodology looks closely at a manager’s commitment and evidence of ESG integration.

This March 2017 edition of our ESG Equity Market Monitor shows a continuation of the long-term growth trend in total equity assets that show meaningful integration of environmental, social and governance performance aspects by asset managers. Our research shows that ESG equity assets under management reached $2.72tn at the end of Q1 2017 as a result of a 21% year-on-year asset growth. Client demand, in particular from pension funds, the widespread acknowledgement of the benefits of integrating ESG and a stronger regulatory environment in Europe continue to drive the adoption of ESG integration by an increasing number of managers. Please don’t hesitate to contact us for more information on who these asset managers are:

The UK Stewardship code in particular has created a set of expectations on UK asset managers which since 2010 have slowly been adopting its core principles of monitoring the ESG performance of the companies where they invest, reporting on these issues and being transparent in their voting policies. Therefore, it is not surprising to see UK institutional investors driving the adoption of ESG integration in equity management, to the point of becoming the largest pool of ESG-integrated equity assets from a geographical standpoint.

ESG-led ownership in listed companies, now averaging 8% globally, grew 13% during the last twelve months. How is this growth being felt by corporates?

Most companies are noticing an increase in the number of ESG-related inquiries from ESG managers as well as from mainstream institutional investors which are somewhere along the journey towards achieving full ESG integration.

ESG analysts rely on extensive sets of data to derive company scores and investment recommendations. Yet the true sustainability story of a company can be hidden behind the numbers. Hence the reason why we encourage companies, and in particular Investor Relations professionals, to proactively reach out to ESG analysts. It is important that the ESG investors hear the individual sustainability and governance story directly from the company itself. In particular, details on how the company is making progress, the challenges it is encountering, and how these themes fit in the overall strategy of the company and in their value creation process, can make a huge difference on how a company is perceived and its ability to attract ESG-driven investors.

While climate change has dominated ESG conversations since the Paris agreement, we are seeing other topics being brought into discussion with companies, such as water risk management and cybersecurity. Leaders Arena’s proprietary research continuously tracks the key ESG factors driving capital allocation in each sector and geography which helps companies prioritise their responses to ESG-related requests and prepare investor engagement adequately.

Leaders Arena’s unique ESG intel helps IROs and related corporate communications professionals to better INTEGRATE, ENGAGE and LEAD

Access our March 2017 ESG Equity Market Monitor report:

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