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Shifting Trends in the Institutional ESG Landscape

13 April 2022

Findings from the eVestment platform show that through year-end 2021, nearly 9,000 strategies consider ESG integration as part of their investment process; however, only 1,400 strategies exist in the dedicated ESG universe out of more than 26,000 on the platform — approximately 6%. eVestment’s recently expanded ESG questionnaire strives to deliver this continued transparency into ESG and classification with integrity, in an effort to segregate true ESG-dedicated products and prevent “greenwashing.”

The Rise in ESG Dedicated Assets

Across the dedicated ESG universe, total assets closed in on $1.5 trillion in dedicated ESG AUM in the fourth quarter, of which over half was domiciled in EMEA, considered to be leading the way in ESG investing. Over the last two years, sizeable and accelerating total net flows from investors in all four regions (EMEA, United States, APAC and Canada) was a prevailing theme. While EMEA maintained a higher overall asset base in the universe, growth accelerated across the other regions as well for the period.

The ESG-Focused Universe

Source: eVestment Asset Flows, Q4 2021.

Accelerating ESG Flows

An accelerating trend in asset flows was observed across broad level ESG universes for the period. A spike in the equity spectrum is evident since 2020 with a huge acceleration in flows from that point forward, as illustrated in the chart below.

Cumulative ESG Universe Flows

Source: eVestment Asset Flows, in USD millions. 

Divergence in Win Rates

Data from eVestment Asset Flows shows a notable divergence between ESG Focused & Non-ESG Focused strategies that are winning and losing assets. As it relates to the Global Equity universe, strategies classified as Global Equity ESG-focused are seeing significantly higher win rates and positive net flows in the 1-, 3- and 5-year trailing periods (74%, 76%, and 75%, respectively) versus those strategies that are solely classified as Global Equity for the same trailing periods (48%, 47%, and 48% respectively). Note that the balance of these percentages does not signify outflows necessarily but rather indicates no movement.

Multi-Regional Equity Universe Flows

Source: eVestment Asset Flows, in USD millions. Q4 2021.

ESG Screening Activity

In taking a closer look at ESG Screening Activity, findings show that nearly 4.5% of screens included some type of ESG field. The proportion of total dedicated-ESG strategy profile views has continuously increased, doubling over the trailing 5-year period globally as illustrated below. There appears to be geographic prevalence to dedicated ESG viewing as well — for example, in the UK where dedicated ESG profile views nearly tripled from the trailing 3-year period.

Global ESG Research Activity

Source: eVestment Analytics.

Dispelling ESG Performance Myths

In examining performance across universes over a trailing 3-year basis, win rates were generally higher across ESG universes than traditional ones, as illustrated in the following chart. For example, the median performance of the Global Equity ESG-Focused universe outperformed the broader Global Equity universe by a couple of hundred basis points. This dispels the myth that investing in dedicated ESG strategies equates to compromising on performance.

ESG vs. Non-ESG Comparisons – Multi-Regional Equities

Source: eVestment Analytics.


Delivering ESG Transparency

As the ESG landscape continues to evolve and shift as a dynamic component of institutional investing, eVestment serves as a leading provider of ESG data to deliver continued transparency and insights to the investment community. Managers are encouraged to continue submitting ESG responses within the database to support the robust aggregation of data and leverage the Sample ESG Questionnaire Responses guide as a reference point.

Note for Managers:
eVestment’s ESG questionnaire gives you an opportunity to fully articulate your ESG story, whether or not you offer dedicated ESG products. It covers environmental, social or governance objectives and policies at the firm level – including diversity and inclusion – as well as product-level questions about how ESG considerations may factor into the investment process. If you have questions about how to provide ESG data to the 1000+ investors and consultants screening in eVestment, we can help: data@evestment.com.

Note for Investors & Consultants:
You can now screen on more ESG considerations than ever. If you’re not sure how to select ESG criteria in your screens, we can help: support@evestment.com.

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