Market Overview

Callan's 6th Annual ESG Survey Reveals Uptick in Adoption and Implementation

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Incorporation rates in 2018 were the highest in the survey's history,
surpassing 40% for the first time

Callan,
a leading institutional investment consulting firm, announced the
results of its sixth annual ESG Survey, noting that 43% of U.S.
institutional investors have incorporated environmental, social, and
governance (ESG) factors into their investment decision-making process
in 2018. The percentage is the highest recorded in the survey's
history—and nearly doubled since its launch in 2013 (22%).

Commissioned and conducted by Callan, the ESG Survey features the
responses of 89 unique U.S. institutional funds, with the largest funds
incorporating ESG factors at the highest rate (72%). Historically,
endowments and foundations have had the highest ESG adoption rates—with
foundations at 64% in 2018 and endowments at 56%. The rate for public
funds is 39% while corporate funds experienced a decrease in adoption
rates (20%).

"The research and data supporting ESG investment have matured
considerably in the past five years in the U.S., and investors are now
more informed about what ESG means and the implementation options
available to them," said Anna
West
, senior vice president and co-manager of Callan's Published
Research Group. "The latest survey reinforces the notion that ESG is not
a one-size-fits-all solution. Rather, investors are finding
implementation approaches that match their funds' goals. The shift in
implementation strategies—from introducing language to identify ESG
goals and beliefs, to working with investment managers to implement
those concepts—suggests we're moving into a new phase with ESG in the
U.S."

Callan's 2018 ESG Survey Highlights:

  • Adoption Growth Continues: After plateauing in 2017
    (37%), there was a reemergence of the upward trend in ESG adoption
    rates since the inception of the survey in 2013.
  • Preparation to Implementation: Implementation approaches
    reflect a new phase of ESG incorporation. Previously, investors
    focused more on pursuing education and adding ESG language to
    investment policy statements. In 2018, 55% of those implementing ESG
    have communicated its importance to investment managers and have
    considered ESG factors with every investment/investment manager
    selection.
  • DB vs. DC: There was a significant difference between
    ESG adoption rates among defined benefit (DB) and defined contribution
    (DC) plans. Corporate DB plans incorporated ESG factors into the
    investment decision-making process at three times the rate (33%) of
    their DC counterparts (9%). Similarly, public DB plans utilized ESG
    factors at twice the rate (43%) of their DC counterparts (20%).

The survey is offered in Callan's Research
Library
, titled "2018 ESG Survey." While the website requests that
visitors register, the survey and other library content are offered at
no cost.

About Callan

Callan was founded as an employee-owned investment consulting firm in
1973. Ever since, we have empowered institutional clients with creative,
customized investment solutions backed by proprietary research,
exclusive data, and ongoing education. Today, Callan advises on more
than $2 trillion in total fund sponsor assets, which makes it among the
largest independently owned investment consulting firms in the U.S.
Callan uses a client-focused consulting model to serve pension and
defined contribution plan sponsors, endowments, foundations, independent
investment advisers, investment managers, and other asset owners. Callan
has six offices throughout the U.S. Learn more at callan.com.

About Callan Institute

The Callan Institute, established in 1980, is a source of continuing
education for those in the institutional investment community. The
Institute offers practical, relevant, original research in an easily
digestible format that includes industry-recognized surveys, timely
blogs, live events, educational conferences, and "Callan College"
workshops. Learn more at callan.com/callaninstitute

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