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ESG boosting returns, finds SSGA

Just over a quarter of professionally managed assets worldwide now have an environmental, social and governance (ESG) overlay – and fund managers are happy with the results, according to a new report.

State Street Global Advisors commissioned Longitude Research to gauge the opinions of senior executives about ESG at 475 investment institutions in the Asia-Pacific region, the United States and Europe.

The resulting report, Performing for the Future, found that throughout 2016, ESG investing accounted for US$22.9 trillion, or just over a quarter, of the world's professionally managed assets.

Of the 475 executives surveyed, 80 per cent said their institution had some form of ESG strategy within its portfolios.

Furthermore, 68 per cent of respondents said the integration of ESG within their portfolios had significantly improved returns, and 69 per cent said ESG had helped them manage volatility.

However, it appears many of the so-called non-adopters’, who make up 20 per cent of the total respondents, are digging their heels in, with 71 per cent of them stating they were not actively considering ESG.

One of the key barriers to more widespread ESG adoption, according to the report, is the need for appropriate ESG benchmarks.

Thirty-three per cent of respondents agreed somewhat that they have difficulty benchmarking their performance against their peers, and 24 per cent agreed with the statement ‘strongly’.

“While there is a sense among investors that current difficulties around performance assessment are part of the evolution process for what is a relatively new investment framework, it’s clear that the inconsistency of measures leads to a degree of frustration and constitutes a barrier for further adoption of ESG,” the report said.

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