How Institutional Investors Embrace Responsible Investing

From Principles to Best Practices

Responsible investing has gathered enough momentum to reach the mainstream. What is less clear is how advanced global institutional investors are in the process of integrating ESG principles into their investment decisions.

To find out, Franklin Templeton undertook a comprehensive study of the progress of asset owners on their journey towards ESG adoption.

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Four Key Themes in the ESG Adoption Path

1. Traction

As ESG considerations gain acceptance, there is broad consensus on risk benefits, but clarity over the impact on returns could unlock wider adoption.

30%

of respondents still believe that ESG integration may negatively affect returns

2. Deepening

As investors gain experience, initial responsible investing processes are supplemented with new methods and tools, rather than moving from one method to another.

91%

of sophisticated investors favour integration of ESG into fundamental analysis

3. Interpreting ESG factors

E, S and G become interconnected, but shifts in priorities make E the primary focus. Regional differences are shaped by local market structures.

78%

of respondents prioritise climate change

4. Filling in data gaps

Unreliable and opaque data pose challenges for many asset owners. Data standardisation is essential for further adoption.

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