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ESG Adoption Stalls Among U.S. Institutional Investors

By Alex Padalka October 18, 2019

Institutional investors in the U.S. are far more skeptical than their counterparts in other parts of the world about applying environmental, social and governance principles to their portfolios, according to a recent report.

In the U.S., the percentage of institutional investors using ESG principles in their decision-making and investing remained flat at around 65% this year, while it rose to 97% in the U.K. and 80% in Canada, according to a report from RBC Global Asset Management. Moreover, the percentage of U.S. respondents who said they’re using ESG principles “significantly” as opposed to “somewhat” inched up just 3% from 2018 to 2019, while that percentage rose by more than 5% in Canada and 30% in the U.K., according to a survey of 799 institutional asset owners, investment consultants and investment professionals in the U.S., Canada, Europe and Asia.

And while 98% of “significant” adopters of ESG strategies are confident that portfolios incorporating such investments will do as well or better than portfolios with no ESG investments, skepticism is on the rise among the rest of institutional investors, RBC says. The percentage of respondents who think ESG-based portfolios will underperform non-ESG-based portfolios rose from 10% to 18%, according to the survey. And the percentage of respondents who aren’t sure whether ESG products can mitigate risk increased from 18% to 24%, RBC says.

Institutional investors in the U.S. are also more skeptical about gender diversity targets, according to the survey. While 55.6% of respondents in the U.K. and Europe believe that corporations should adopt such targets, only 48% of U.S. respondents think so, RBC says.

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