Pensions and ESG: An Institutional and Historical Perspective

Abstract

Sustainable investing is growing into its moment. Funded pensions, which were among the first institutions to respond to sustainability concerns, are showing renewed interest in better ways to reflect responsible investing objectives, along with regulators, asset managers and shareholder groups. Looking back, the principal elements of sustainability—environmental, social and governance (ESG)—all have different origins and took different pathways. Looking across, sustainable investing developed differently depending on region and country. Viewing it today, we see the trend toward E, S, & G convergence—of definition, process and organization—toward a more integrated investment perspective and process. With growing asset size, funded pensions, sovereign wealth funds and other large institutional investors became ‘universal owners’ and, along with thought leaders and regulators, drove the evolution of sustainable investing toward the more systematic set of tools and policies we see today. Looking forward, questions remain, such as who will be most influential in determining the future of sustainable investing—pensions and other institutional investors, governments, shareholders and companies-- as well as what it will look like. As such, sustainability remains a work in progress and pensions are in a strong position to shape its evolution.