Why and How Investors Use ESG Information: Evidence from a Global Survey

Using survey data from mainstream investment organizations, we provide insights into why and how investors use reported environmental, social, and governance (ESG) information. Relevance to investment performance is the most frequent motivation, followed by client demand, product strategy, and then, ethical considerations. An important impediment to the use of ESG information is the lack of reporting standards. Among the various ESG investment styles, negative screening is perceived to be the least beneficial to investments and is driven by product and ethical considerations. Full integration and engagement are considered more beneficial and are driven by relevance to investment performance.A practitioner's perspective on this article is provided in the In Practice piece "ESG Investing Moves to the Mainstream" by Keyur Patel, online 18 June 2018. Disclosure: Professor Serafeim serves on the advisory board of investment organizations that practice various environmental, social, and governance styles. Professor Amel-Zadeh received a research grant from Bank of New York Mellon supporting this research. He also received speaker honoraria from the same organization. Editor’s Note Submitted 19 October 2017 Accepted 23 February 2018 by Stephen J. Brown This article was externally reviewed using our double-blind peer-review process. When the article was accepted for publication, the authors thanked the reviewers in the acknowledgments. John Christopher Hughen, CFA, CIPM, was one of the reviewers for this article.