US investors not satisfied with ESG-related disclosures by issuers

Nonetheless, two-thirds of investors have adopted ESG-integrated portfolios

Key points:

• Less than half of US investors are ‘very’ or ‘somewhat’ satisfied with the amount and the quality of ESG-related disclosures provided by asset managers and other issuers
• Equities continue to be the most common asset class for incorporating ESG principles
• Institutional investors are deploying ESG in real estate, infrastructure and other alternatives at a higher rate than financial advisers

Less than half of US investors are ‘very’ or ‘somewhat’ satisfied with the amount (41%) and the quality (38%) of ESG-related disclosures provided by asset managers and other issuers, recent research has found.

A study by RBC Global Asset Management revealed that only 10% of US investors are very satisfied with the amount of disclosures, while 8% is very satisfied with the quality of these disclosures.

Carried out among institutional investors and financial advisers, the research found that financial advisers report a much higher adoption of ESG-integrated portfolios compared to US respondents overall, at 76% and 65% respectively. At, 31%, they also have higher expectations of ESG investments than US institutional investors (28%).

About half (51%) of the investors surveyed cite fiduciary duty as a reason for incorporating ESG principles, while 49% said they believe that integrating these factors will lower their risks and increase their returns. Only 20% of all US respondents said they incorporate ESG factors because they are required to do so.

Interestingly, at 39%, fiduciary duty is also the most cited reason for investors who do not integrate ESG factors in their investment decisions, showing a split opinion on the value of ESG in creating alpha and investing in a client’s best interest.

Equities continue to be the most common asset class for incorporating ESG principles, with 80% of US investors selecting equities as an asset class in which they integrate ESG factors. This trend is even more pronounced among financial advisers, where 91% said they integrate ESG factors in equities. This is far higher than fixed income, for which only 54% of all US respondents said they integrate ESG factors.

But the survey results suggest that institutional investors in the US are deploying ESG in other asset classes at a significantly higher rate than financial advisers: real estate (37% all US respondents vs 22% financial advisers), infrastructure (26% vs 16%) and other alternatives (33% vs 17%).

The research found that anti-corruption, water, cyber-security, climate change and shareholder rights/voting were the ESG risks that US respondents were most worried about. The ESG factors that were of least concern are employee engagement, income inequality and workplace diversity.

The research findings indicate that most US investors are interested in ESG, but that they would like to see improvements in the ESG-related disclosures from asset managers and other issuers. Asset managers could work on improving their communications about ESG, but it seems responsible investing is not a priority for them in the US market. Data from Fundamental Monitor, an innovative technology tool developed by Fundamental Media providing real-time insights into the advertising campaigns by asset managers across the globe, showed that asset managers only sparingly advertise their ESG capabilities in the US.