The News: An estimated 88% of total U.S. public market assets are affiliated with a Principles for Responsible Investment (PRI) signatory, however only 4.5% of signatory assets are described in their official product documents (e.g., prospectuses) as taking ESG considerations into account to inform investment decisions, a Cerulli study found.
Who It Affects: Investors who want to utilize a socially responsible approach to investing.
Why It’s Important: Managers are challenged by myriad factors around clarity and standards of terminology. They hesitate to document their commitment to responsible investing in prospectuses and other formal investment documents.
Background: Key factors managers cite as major challenges to client receptivity: client unfamiliarity with ESG factors (26%), the perception that considering ESG issues has a negative impact on performance (25%), and difficulty defining the boundaries of ESG (25%).
What’s Next: Although many firms have adopted ESG principles, figuring out how to implement them continues to be a work in progress. Cerulli Director Michele Giuditta said “We are in the beginning stages of adoption, with many firms just starting to build their ESG integration processes.”