It was clear to us that corporate leaders will soon be held accountable by shareholders for ESG performance-if they aren’t already. Most of the investment leaders in our study described meaningful steps their firms are taking to integrate sustainability issues into their investing criteria. But not until recently have they translated their words into action. Of course, investors have been voicing concerns about sustainability for several decades. We found that ESG was almost universally top of mind for these executives. We know of no other research effort that involved so many senior leaders at so many of the largest investment firms. We recently interviewed 70 senior executives at 43 global institutional investing firms, including the world’s three biggest asset managers (BlackRock, Vanguard, and State Street) and giant asset owners such as the California Public Employees’ Retirement System (CalPERS), the California State Teachers’ Retirement System (CalSTRS), and the government pension funds of Japan, Sweden, and the Netherlands. The impression among business leaders is that ESG just hasn’t gone mainstream in the investment community. Sure, some heads of large investment firms say they care about sustainability, but in practice, investors, portfolio managers, and sell-side analysts rarely engage corporate executives on environmental, social, and governance (ESG) issues. But many of them also believe that pursuing a sustainability agenda runs counter to the wishes of their shareholders. Most corporate leaders understand that businesses have a key role to play in tackling urgent challenges such as climate change.
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