By Virginia E. Harper Ho

Globally, market demand is rising for investment products and practices that take “environmental, social, and governance” (ESG) factors into account, challenging asset managers and capital markets to adapt in new ways. This chapter outlines why sustainability issues are increasingly relevant to mainstream asset owners and asset managers. It then explores the evolving regulatory landscape for sustainable investment in the U.S., focusing on the degree to which it supports or facilitates ESG integration into investment management and the exercise of shareholder governance rights around ESG performance and impacts.

Although some aspects of the U.S. regulatory framework constrain the expansion of ESG integration in investment analysis, fund management, and shareholder activism., changing investor expectations and emerging sustainable finance regulations elsewhere are influencing the regulatory context of sustainable finance in the United States. The resulting shift from resistance to a modest “retooling” may more strongly support asset manager and institutional investors’ ability to take account of ESG in their investment, proxy voting, and engagement decisions. At the same time, asset managers still face key challenges in implementing ESG-sensitive investment and engagement strategies in a manner that aligns with their fiduciary duties.

This chapter is a forthcoming contribution to Investment Management, Stewardship and Sustainability, Iris Chiu & Hans-Christoph Hirt, eds. (Hart Publishing: 2022).

Source:  SSRN