The Evolving Future of ESG Integration in Investment Analysis
A Survey of CFA Institute EU-Based Members
With the launch of the European Commission’s sustainable finance action plan, the topic of sustainable investing—which considers ESG factors and their impact—is reaching a new level of importance in the investment management profession.
The Evolving Future of Fiduciary Duty in an ESG WorldView the report (PDF)
This member survey was designed to investigate what our nearly 24,000 EU-based members consider to be the correct role of ESG factoring in investment management 1) in general and 2) as part of the formal fiduciary duty of regulated investment managers specifically, along with 3) member opinions on related issues in sustainable investing.
Broadly speaking, a majority of respondents believe that ESG factors should be considered by managers when making investment decisions. However, respondents believe that regulators should not mandate the explicit consideration of ESG factors by regulated investment managers. Instead, the extent to which ESG factors are considered, like the consideration given to any other investment factors, should be left to the professional judgment of investment managers in consultation with their clients. According to respondents, any investment factors, whether ESG or other technical or fundamental factors, should not be mandated by regulators.
Despite the consistency of these responses, the survey found less consensus on whether ESG factors should be part of the fiduciary duty of investment managers. However, respondents felt strongly that any mandate to consider ESG factors during the investment process should not bind or obligate the investment manager to take any particular action or dictate subsequent investment decisions as a result of that ESG consideration. Said differently, ESG consideration should not translate into a forced ESG investment policy.
Finally, the survey found relatively weak support for a regulator-generated, EU-level, ESG product-labeling convention, or the creation of other ESG taxonomies by authorities.
An email invitation was sent to all CFA Institute members (23,868) in the EU. The survey was open from 17 July to 31 July 2018. We received 645 valid responses, for a response rate of 2.7% and an implied margin of error of ±3.8%. A plurality of respondents came from the United Kingdom (34.3%), with the United Kingdom, Germany, and the Netherlands accounting for almost 60% of respondents. Approximately 42% of respondents were employed as portfolio managers, and approximately 16% worked as consultants.
Sustainable investing and ESG are becoming increasingly important for investors, managers, and regulators. CFA Institute commissioned a unique survey of its EU members on attitudes toward the appropriate role of ESG factors in the investment process. Broadly, the main findings of this survey can be summarized as follows:
- Respondents believe that ESG factors should be considered by investment managers when making investment decisions.
- In general, regulators should not be mandating specific factors to be considered by managers during the investment process; inclusion of such specific factors should be left to the investment managers and their clients.
- In particular, regulators should not be mandating ESG factors to be considered by managers during the investment process; consideration of ESG factors should be left to the investment managers and their clients.
- Consensus is lacking on whether ESG factors should be part of the fiduciary duty of managers.
- Respondents feel strongly that any mandate to consider ESG factors during the investment process should not, in turn, include any binding obligations on the subsequent investment decisions taken.
- Support for an EU-level ESG label and taxonomy is relatively weak.