Even as sustainable investing becomes a political football, pension funds and other asset owners in Europe and North America are adopting sustainable investment practices for their portfolios, according to a study by Morningstar Indexes.

The “Voice of the Asset Owner” survey was based on 14 interviews with asset owners. They generally saw investing using environmental, social, and governance metrics “as a core element of investing rather than a specialist niche,” according to the study.

The respondents said their use of ESG was driven by both client demand and their conviction in the strategy. They used ESG factors because of wider public awareness and support, as well as regulation that endorses asset owners taking a broader view of their responsibilities, particularly in Europe. “Before, it was globalization, efficiency,” one asset owner said. “Now, it is more emphasis on resiliency than efficiency.”

The respondents used ESG to enhance their investment processes and to help drive sustainable development. Most saw ESG as a financial factor and considered ESG objectives as valid goals when pursued alongside—but not at the expense of—financial objectives. There was also “broad agreement among respondents that ESG does not harm investment returns,” Morningstar wrote.

ESG’s Essential
“ESG is mainstream, material, and multifaceted,” said Thomas Kuh, head of Morningstar’s ESG indexes strategy. “We heard almost unanimously from the asset owners we interviewed that ESG is a critical part of their investment policy and day-to-day thinking.”

Read more @Mornigstar