Morgan Stanley finds investors adding ESG factors

Morgan Stanley in a new survey found that a growing majority of global institutional investors are already actively integrating ESG factors into their investment process and are eager to do more.

With 80% saying they are folding in ESG concerns is an increase of 70% in 2017, officials reported at the Morgan Stanley Institute for Sustainable Investing and Morgan Stanley Investment Management.

The survey was comprised of 110 public and corporate pensions, endowments, foundations, sovereign wealth entities, insurance companies and other large asset owners. Nearly all (92%) of those surveyed had total assets of more than $1 billion.

Nearly 80% of investors said they agreed that sustainable investing is a risk mitigation strategy. Additionally, asset owners are already practicing sustainable investing with eyes open to reputation and stakeholder engagement. Nearly a third of asset owners say they lack the adequate tools to assess investments against their ESG goals.

The survey builds on work the Morgan Stanley Institute for Sustainable Investing’s extensive body of research that has been tracking investing trends in ESG over the last six years.

“These results provide an additional proof point that sustainable investing has become table stakes,” said Audrey Choi, chief sustainability officer and CEO of the Institute. “This year’s survey found more asset owners identifying return potential as a key driver for sustainability integration, and accordingly many envision a future where they will limit their allocations to managers with formalized sustainability approaches.”

Right now, 15% of respondents to Morgan Stanley’s survey say they are actively considering a sustainable investing option. Nearly 60% say they can envision a time when they will only allocate to investment managers with a formal approach to ESG.

Ted Eliopoulos, vice-chairman at Morgan Stanley Investment Management, sees the changing perception of investors.

“The majority of investors surveyed believe that companies with ESG-aligned practices can be better long term investments, but continue to need better reporting and data to evaluate holdings on those criteria,” he said. “Investment managers can play a critical role supporting clients as they implement tools to assess how investments align with their sustainability goals.”