Environmental, social and governance (ESG) factors are transitioning from being ‘nice to have’ to an integral part of the investment process. Asset managers have woken up to what investors are demanding but from a global perspective, implementation has been far from homogeneous.

There is little doubt that Europe is leading the way on ESG. Indeed, institutional investors are looking beyond financial returns by making impact investments to contribute towards a sustainable future, without passing the cheque along to the next generation. As a double act alongside asset managers, they have the power to drive corporate change and prioritise people, profits and the planet.

However, despite the post-financial crisis shift towards ESG investing, there is still some way to go.

The US and emerging markets are lagging behind Europe and consequently, the scale of integration of ESG across companies and regions varies greatly. Attitudes towards ESG range from those who take it seriously at the very top level of management to those who mention it as a footnote in reports without any sign of it being embedded into the organisation’s culture and practices.

While there is still some debate around whether ESG factors lead to higher profitability, time will ultimately determine whether the ESG leaders have financially outperformed the laggers. But who would not want to invest in companies with sustainable environmental and social franchises that are well governed?

Romil Patel, Report Editor

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