The evolution of ESG investing: From popular rise to strategic growth

Contributed by: Aida Chakri, Manager, Strategy and Sustainable Finance, EY-Parthenon

Acting on ESG is no longer optional for asset managers. ESG has become a real business model imperative driven by client demand.

The first Canadian Asset Manager ESG Survey revealed a growing interest in ESG integration, driven largely by institutional investors demanding a more modern version of ESG investing from their asset managers, going beyond the traditional exclusionary approach, and high-net-worth clients demanding the expansion of ESG propositions to include outcome-based products, and some even hinting at philanthropic products.

We perceived varying levels of maturity in ESG integration, with most respondents’ immediate concern being around the integration of ESG risk management across their product offering. In our first report, the respondents’ expectations of what the future held for ESG investing beyond the immediate focus on integration was the rise of outcome-based products. Not surprisingly, we found this to be a primary focus in this second issue of our survey.

Over the past year, the level of ESG integration into the investment decision-making process has evolved more quickly than ever before, with asset managers not only integrating it from a risk management perspective, but also from a long-term value perspective. In addition, clients’ requests on this front continued to evolve both from the institutional and retail perspectives.