The Institutional View of ESG

In June, NICSA hosted a well-attended panel on ESG in New York. This event covered a great deal of ground, and in Part 1 of this three-part series, we discussed how the panelists described learning about ESG as being akin to Learning a New Language.” 

Rosetta Stone secured, the audience was then treated to discussion on where the ESG space is headed, particularly with regard to the institutional community. 

When it comes to ESG: “Investors want consistency in scoring and data,” said Todd Scorzafava, Partner in Charge of Wealth Management, Eagle Rock. “The marketplace understands that ESG is not a niche and that this is a conversation they should all be having, but that lack of consistency comes up as an issue again and again.”

Mark Hays, Vice President – Sustainable Investing with J.P. Morgan Asset Management, agreed, and added, “Institutional investors are focused first and foremost on hitting their financial goals. They’re clearly thinking about ESG, but they’re thinking about it through the lens of how it can help them meet the needs of their constituents and achieve their long-term financial objectives.”

But beyond merely thinking about ESG, how are institutions actually implementing ESG-focused approaches? 

According to Hays, when it comes to implementation, at least in the institutional community, the preferred method is often bespoke rather than “off the shelf.” “There is still a lot of skepticism around ESG ‘products’ in the institutional community,” he added.

Hays continued, “One size fits all doesn’t always work for this universe of investors – you need to be able as an Asset Manager to design solutions that are tailored to specific needs.  

John Farley, Vice President – Responsible Investment Strategy, Calvert Research & Management, added, “There is a tremendous need for education right now. You have some of the endowments and foundations who are really far along in their ESG journey; you have others who might be starting to carve out some allocations, perhaps as an experiment. For institutional investors, adopting ESG is a very complicated issue. You have to define what your goals are, you have to define the performance metrics, you have to make sure all the stakeholders are on the same page, work on internal communications.”  

That internal communications focus was one that other panelists echoed. 

“You have to move away from just talking with an audience that’s already involved in ESG efforts,” said Hays. 

This is part 2 of a 3-part series of posts from this latest NICSA ESG event.

Part 1: Like learning a new language

Coming soon:

Part 3: The intersection of ESG, Big Data and Artificial Intelligence

Want to learn more? Don’t miss out on these events coming this fall from NICSA:

September 19, 2019: Chicago – ESG Marketplace & Data Trends

September 25, 2019: San Francisco – ESG Product Trends & Regulatory Practices

Note: Although the observations contained in this work represent the best thoughts of the individuals comprising the NICSA panel, they do not necessarily reflect the views of NICSA or any of its member organizations. Matters addressed in this work may touch upon legal or regulatory matters, however nothing herein is intended to be or should be construed as legal advice. You should contact your own counsel in order to obtain legal advice regarding these or any other matters.

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