The Next Wave of ESG Integration: Lessons from Institutional Investors |
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| Authors: | Chris Ailman Michelle Edkins Kristi Mitchem Ted Eliopoulos Janine Guillot |
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| Affiliation: | 1. Chief Investment Officer of CalSTRS, managing an investment portfolio of over $200 billion, and is also the Chair of SASB's Investor Advisory Group.;2. Managing Director at BlackRock and Global Head of its Investment Stewardship team, which has over 30 specialists who cover the Americas;3. Europe, the Middle East, and Africa;4. and Asia‐Pacific.;5. President and CEO of Wells Fargo Asset Management, which has more than $480 billion in assets under management in institutional separate accounts, mutual funds and stable value portfolios.;6. Chief Investment Officer of CalPERS;7. Director of Capital Markets, Policy and Outreach at SASB |
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| Abstract: | In this panel that also took place at the recent SASB Symposium, senior representatives of four leading institutional investors—BlackRock, Ca lPERS, Ca lSTRS, and Wells Fargo—emphasize the relevance of ESG data for “mainstream” investors and the importance of integrating it with traditional fundamental analysis rather than viewing it as a separate set of reporting responsibilities. Moreover, the logical place for integrating ESG information is in the most forwardlooking section of financial reports, the “Management Discussion and Analysis,” or “MD&A,” which would be strengthened by including more and better information about the companies' ESG risks and initiatives. Some panelists noted that ESG information is likely to be valued by investors because of its ability to shed light on “idiosyncratic” risks that are not captured by the traditional risk factors that have long dominated asset pricing models. Others described ESG information as helpful in evaluating and comparing the “quality” of management in portfolio companies. But all agreed that efforts like the SASB's to standardize ESG data are essential to successful integration of that data into the decision‐making process of large mainstream investors. And as the panelists also made clear, there is an important generational component to the growing movement to integrate ESG into mainstream investing, with Millenials—and particularly Millenial women—showing especially strong support. |
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