Global ESG policy adoption 2020, by organization type

Banks led the way in having implemented environmental, social and governance (ESG) policies worldwide in 2020, followed by non-financial companies and asset managers. Among the banks surveyed, over 62 percent had a firm-wide policy on responsible or ESG investments. Family offices accounted for the lowest share of ESG policies, which was 37 percent, and the highest share of respondents who stated no intention to implement one. Many investors believe the coronavirus pandemic will increase the awareness and importance of considering ESG issues.

What is ESG policy?

ESG policy refer to Environmental, Social, and Governance policy, which is a set of standards for sustainable and conscious investing. The most common focus of the three components is the ‘E’ - environmental. Overall, ESG investing is becoming more popular., There are many reasons to consider ESG factors - for example society or clients expect it, or regulators require it. The main reason, however, why many investors chose to implement ESG policies, is because they believe it can improve investment returns and reduce risk.

What are the obstacles with implementing ESG policy?

While many investors chose to implement ESG factors into their investments as they believe it is beneficial with regards to risk and return, a large share of investors reject this notion, thinking it sometimes or always involves accepting lower returns or higher risks. Especially in the United States (compared to Canada, Europe and Asia), a relatively high share of investors expected that ESG portfolios will underperform. A further barrier to implementing ESG policy might be that a higher share of investors in 2020 had the impression there were not enough ESG offerings in some asset classes, especially in hedge funds.