Companies seeking investors may do well to increase their focus on environmental, social, and governance (ESG) approaches, as investments in sustainable strategies are growing rapidly in the US. Assets under management in funds using an ESG-only approach were up 5.8% at the end of February, from Dec. 31, and up 17% from the end of 2015, according to Morningstar Inc. data (via Pensions & Investments). But the promise of ESG investing is grounded in data transparency and engagement, says Lou Maiuri, executive VP and head of State Street Global Exchange and Global Markets businesses. Organizations may find that having a custodian for data has become as critical as having a custodian for financial assets when trying to deliver value to investors.
While a State Street Corporation survey of investors has found that obstacles to ESG investing are declining, 60% of institutional investors still say a lack of transparent, standardized data is a significant barrier, writes PlanSponsor.
The survey, Investing Enlightenment: How Principle and Pragmatism Can Create Sustainable Value through ESG, also found that 92% of institutional investors want companies to engage in – and clearly identify – those ESG initiatives that affect performance.
State Street has suggested investors look for some common elements; companies seeking investments should consider the following:
–Decisive support from the C-suite on ESG issues;
–Working within the industry to establish standardization of ESG data and reporting requirements;
–Ability to provide ESG data to potential investors.