Just 9% of investment strategies receive high ESG ratings

RatingJust 9% of more than 5,000 investment strategies achieved the highest environmental, social and governance (ESG) ratings, according to an analysis by Mercer, an investment consultancy.

These ratings “reflect the degree to which portfolio managers integrate the consideration of ESG factors and utilise shareholder stewardship practices within the investment process”, Mercer said.

Having reviewed 5,175 strategies, Mercer found private equity had the largest proportion of highly rated ESG strategies, whereas hedge funds and fixed income had the fewest.

On a regional level, emerging markets and Asia Pacific had the highest proportion of top ratings while Canada had the lowest. With 57%, most of them are in listed equities, followed by fixed income (20%). The rest was spread across real estate, private equity, hedge funds and others.

“We would expect the number of highly rated strategies to increase over the next few years as more and more investment professionals come to recognise the sound investment and competitive reasons for active ownership,” said Andrew Kirton, the global chief investment officer at Mercer.

“Active engagement with companies where performance is seen as wanting ought to have a complementing role in investment management, alongside the sale and purchase market disciplines.”

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