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The consideration of environmental, social, and governance (ESG) issues into institutional investment will be major trend over the next five years
Toronto (11 August 2008) -The consideration of environmental, social, and governance (ESG) issues into institutional investment will be one of six major macro trends over the next five years, due to sustainable performance influences and desirability, says a study by Watson Wyatt.
Its ‘Defining Moments’ report says the growth of ESG investing would be predicated on four major trends:
- demand for big institutional funds to apply responsible investing principles;
- sustainability and climate change as mainstream or specialized propositions;
- the impact of politically motivated activism; and
- responsible investment becoming more personalized through Defined Contribution pensions saving.
The emergence of climate change as an issue of major societal importance could be “the catalyst for change,” it said.
The study noted several ways in which the trend to ESG investment would increase. One of the main factors would be greater pension fund activism in challenging the corporate Board of Directors to consider governance questions in their investment decisions in an attempt to “improve shareholder wealth rather than just passively accepting sustained mediocrity.”
Another area of expanded activism could involve “economically targeted investments” (ETI) intended to improve the economic well-being of a geographical region and its residents.