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Financial report / market analysis (page 32)
File Size:
1.68 MB
Summary
This document appears to be page 32 of a financial report or white paper analyzing the adoption of ESG (Environmental, Social, and Governance) investing strategies by sovereign entities. It highlights a geographic divide, with Europe, Canada, and Australia leading adoption, while the US and emerging markets remain reluctant due to a lack of long-term data. While the document bears a 'HOUSE_OVERSIGHT' Bates stamp—indicating it was likely produced during a congressional investigation (possibly related to financial institutions connected to Epstein)—the content of this specific page is a generic market analysis regarding sovereign wealth funds and contains no direct references to Jeffrey Epstein, his associates, or specific transactions.
Organizations (2)
| Name | Type | Context |
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| NMG | ||
| House Oversight Committee |
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| Location | Context |
|---|---|
Key Quotes (3)
"In the absence of long-term risk and performance data, the role of ESG is unclear for many sovereigns"Source
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"funds in the US and emerging markets have been reluctant to commit to ESG"Source
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"NMG’s Global Asset Management Study 2017"Source
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Full Extracted Text
Complete text extracted from the document (3,135 characters)
In the absence of long-term risk and performance data, the role of ESG is unclear for many sovereigns
Environmental, social and governance (ESG) investing looks to incorporate ethics and sustainability into the investment process. Sovereigns are well placed to implement ESG strategies (or component sub-strategies) due to their scale, reach, size and long-term orientation. In addition, many investment and liability sovereigns have a clear basis to consider sustainability factors in delivering their objectives, given their own mandates and through their growing internal management capability.
Environmental, social and governance (ESG) investing looks to incorporate ethics and sustainability into the investment process. Sovereigns are well placed to implement ESG strategies (or component sub-strategies) due to their scale, reach, size and long-term orientation. In addition, many investment and liability sovereigns have a clear basis to consider sustainability factors in delivering their objectives, given their own mandates and through their growing internal management capability.
However, contrary to early expectations, uptake of ESG practices appears to be less broad than initially anticipated. On the one hand, established sovereigns across Europe, Canada and Australia have been pivotal to the evolution of ESG investing among institutional investors. Many of these sovereigns were crucial in the development of sovereign investment strategies over past decades, and continue to have high levels of influence over sovereign models globally relative to their size. Against this, funds in the US and emerging markets have been reluctant to commit to ESG (figure 22) in the absence of objective data on the investment risk/return trade-offs implicit in these strategies.
While uptake of ESG has not increased in line with historical expectations, there is a clear appetite for perspectives and analysis from adopters, asset managers and academics. In fact, among institutional investors globally ESG is cited as the most important area for thought leadership (NMG’s Global Asset Management Study 2017), highlighting investor demand for greater understanding.
Qualified support for ‘environmental’ and ‘social’ screens given reputational risks of non-adoption, however further commitment depends on emerging evidence of investment implications
For sovereigns looking to adopt ESG investing, the most common step is to introduce negative screens on managers and securities which fall below ethical standards (figure 23). This process lends itself to environmental and social factors, given growing levels of disclosure of carbon footprint and employee diversity within public markets. Indeed, environmental factors are among the ESG issues of greatest importance to sovereigns shown in figure 24.
For sovereigns looking to adopt ESG investing, the most common step is to introduce negative screens on managers and securities which fall below ethical standards (figure 23). This process lends itself to environmental and social factors, given growing levels of disclosure of carbon footprint and employee diversity within public markets. Indeed, environmental factors are among the ESG issues of greatest importance to sovereigns shown in figure 24.
Certain sovereigns noted that negative environmental and social screens can be simply inserted into the investment process as an extra step within security selection, with minimal additional costs of management and expertise. Respondents also stated that the measurement of the investment impact of negative screens was simple, as the social investment strategy was most often constructed from a fully inclusive benchmark.
Despite some non-users citing analysis showing the negative effect of ESG screening strategies on short-term returns, there was a sense among interviewees that greater levels of disclosure increased reputational risk of non-adoption relative to high-profile ESG adopters.
ESG adoption has been driven by established sovereigns across Europe, Canada and Australia.
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