Harvard Business Review published research findings on ESG factors in investment decisions
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Recent research by by David Larcker, Brian Tayan and Amit Seru published in the Harvard Business Review (HBR) was summarized as follows: "ESG investing has not disappeared, but it has changed. Longitudinal survey data from U.S. retail investors and large institutional asset managers show that early enthusiasm—especially among younger investors—has converged around a more pragmatic, risk-first approach. Generational differences in concern, willingness to sacrifice returns, and support for ESG activism have largely narrowed, with retail investors’ views now closely resembling those of institutions. ESG remains influential where risks are concrete and time horizons are clear, but strategies built on presumed investor altruism are increasingly fragile."
Institutional Investors apply ESG factors as risk framework
Among institutional investors ESG factors are widely considered in the investment decisions. The HBR article quoted confirmed what asset managers and asset owners practice: "Institutional investors overwhelmingly view ESG as a risk framework, not a values-driven mandate. Governance factors dominate decision-making and are widely seen as table stakes—important, but largely priced in. Environmental considerations, almost entirely focused on climate risk, are viewed as material over medium-term horizons. Social factors play a limited role, with data security and privacy standing out as exceptions."ESG factors in asset manager and fund selection
"Crucially, institutions use ESG asymmetrically. Poor ESG characteristics can disqualify an investment with otherwise strong fundamentals, but strong ESG credentials rarely compensate for weak financials. ESG is a filter, not a return engine", as reported by HBR. The consideration of ESG factors in asset manager and fund selection arrived at a level where both parties, asset owners and asset managers can see the benefit from the outcomes.
For more information please refer to the HBR article.
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