The most sought after environmental, social and governance insights for institutional investors in Q3 were labor rights (19%), gender equality (18%), net zero carbon goals (13%) and environmental norms (13%), according to the latest research from ISS ESG.
When it came to the broad breakdown of ESG engagement, ISS ESG found that in Q3 environment topics (49%) were just ahead of social topics (47%), with governance trailing by a wide margin (4%). When looking at the United Nations’ Sustainable Development Goals, investors were focused on environment issues such as clean water and sanitation (15%), life on land (14%), and climate action (11%). Meanwhile, social issues of focus were gender equality (15%) and decent work and economic growth (12%).
The results of ISS ESG’s quarterly research, released Wednesday, are drawn from institutional investor engagement with 188 companies around the world across 225 topics. The results were global, with the most activity coming from company engagement in Asia (46%), North America (36%), and Europe (15%).
ESG conversation amid policymakers and the public is often around environmental concerns, with measures of progress being drawn from global initiatives to tackle climate change such as the Conference of the Parties of UNFCCC (COP 27), which ended Friday. The ISS ESG results show that institutional investors are also very much focused on social issues such as worker rights, gender equality, and corruption, with 41% of topic interest coming from these areas, and the rest going to climate sustainability issues.
Source: ISS ESG
ISS ESG’s Quarterly Engagement Update looks at trends drawn from investors using the Rockville, MD-based company’s service to engage with companies on sustainability-related topics. ISS ESG is owned by Rockville, Maryland-based Institutional Shareholder Services Inc., the same parent company that owns PLANADVISER.
Recent research from law firm Dechert and global advisory firm StoneTurn found that organizations that adopt and embed ESG factors into strategy are “more likely to create value and accelerate growth, while minimizing their legal and regulatory risks.
The report, based on a pulse survey of executives, found that ESG strategy is an investment that can create value, reduce costs, and increase productivity and growth. Meanwhile, just one in three respondents said their organization had identified ESG risk in their supply chain in the past two years, and another 60% failed to integrate ESG into their due diligence activities and compliance measures.
The focus on ESG has not led to major integration of such investments in defined contribution retirement plans, according to research. Despite strong growth in ESG funds, along with their assets under management, only 20% of DC plans offered a dedicated ESG option in the fund lineup, according to a 2021 Callan Institute report.
Even if ESG options don’t expand in DC plans, it will continue to be a focus for companies due to both “soft and hard law initiatives” along with investor demand, Vyankatesh Padmanabhi, ESG engagement co-ordinator for ISS ESG, wrote in the research.
“These trends have encouraged more common investment stewardship frameworks for investors seeking positive change in the companies they invest in,” he said.