Integrating Environmental, Social, and Corporate Governance Factors and Sustainability by Asset Class
At Mercer, we believe that an investment view that goes beyond traditional financial analysis and considers a wide range of risks and opportunities – including sustainability factors such as good governance, and environmental and social impacts – is more likely to create and preserve long-term investment capital. Increasing awareness of the growing and aging population, natural resource constraints, and a shifting public sentiment and regulatory landscape on many environmental and social issues present risks and opportunities to investors.
In Mercer’s Investment Framework for Sustainable Growth, we distinguish between the financial implications (risks) associated with environmental, social, and corporate governance (ESG) factors, and the growth opportunities in industries most directly affected by sustainability issues. Mitigating emerging risks requires flexibility, foresight, and fresh thinking about risk management. At the same time, investors should adapt their strategies to capitalize on new opportunities.
Mercer’s portfolio reference guide, The Pursuit of Sustainable Returns: Integrating Environmental, Social, and Corporate Governance Factors and Sustainability by Asset Class, outlines the drivers for addressing sustainable growth trends at a portfolio level for each major asset class.
Incorporating investments that reflect a greater level of ESG integration or sustainability themes into the asset allocation framework is an area in which there is growing interest. We believe regulatory pressures to meet global standards of ESG integration and responsible stewardship will only increase in the coming years and we therefore see this as an area of increasing importance over the long-term for our clients.