TheCorporateCounsel.net

The Hoover Institution and other Stanford-affiliated entities recently published the results of a survey of senior decision-makers at 47 of the largest institutional investment firms and asset managers in North America, Europe & Asia on sustainable investing priorities. The survey found that when it comes to ESG issues, there’s climate change and corporate governance, and then there’s everything else. This excerpt summarizes some of the key findings:

– When asked which ESG factors fund managers explicitly consider as part of an investment decision, climate change ranks as the most important, selected by 78% of respondents. After this, the next four factors are all governance-related: board structure (72%), ownership structure (72%), board diversity (65%), and quality of financial reporting (57%).

– The least important ESG factors according to respondents are the ratio of CEO pay to the pay of the average worker (20%), pollution and waste byproducts (24%), packaging and product waste (24%), and raw material sourcing (26%).

– Most investors (67%) consider ESG quality as one of many factors when making an investment decision; 2% use it to screen out potential investments, while 11% do not rely on it at all. Overall, 59% say ESG is important, while 41% say it is not.

Since investors appear to be most interested in governance and climate-related issues, I found another one of the survey’s conclusions a little surprising. The survey found that 98% of investors believe that governance risks are appropriately reflected in stock prices and 76% believe that climate risks are mostly or somewhat reflected in those prices. In contrast, only 50% said environmental risks (other than climate change) and 46% said social risks are reflected in stock prices. If that’s what these investors think, shouldn’t the risks that aren’t appropriately reflected in the market price for company stocks be more of a priority to them?

– John Jenkins