Responsible investing is on the rise – asset managers are adopting ESG practices and asset owners are allocating to responsible solutions. Asset managers continue to adopt ESG-related practices while investors are increasingly interested in going beyond financial objectives to generate environmental and social returns. According to US SIF as of 2018, approximately $11.6 trillion, or one-fourth of the professional assets under management in the US, incorporate ESG considerations. Moreover, expanded data availability and improved company disclosures have enabled asset managers to bring ESG considerations into their core investment processes and develop a wide menu of responsible investment solutions.
Despite the momentum, barriers exist. Inconsistent terminology, differing ESG integration approaches and varying product categorizations present communication challenges for asset managers and asset owners alike. In this guide, we decode ESG by sharing common terms and definitions as well as our view of the evolving responsible investment landscape.