ESG and Investment Management: From a Function to a Mindset

Over the last few years, ESG has become an increasingly important factor in assessing both investment and risk mitigation opportunities within the investment management industry. Most sophisticated pools of capital have committed to ESG integration by hiring or appointing ESG leaders — some of whom assume the role in addition to their existing portfolio — and creating a structure in which they report to the CEO, CIO or the investment committee. While it’s gratifying to see so many investment managers on the ESG path, what if there was a way to amplify the extent to which ESG integration could positively impact the organization at large?

In our opinion, the path forward lies in transforming ESG from a function to a mindset.

While the hiring of ESG leadership and thought leaders in specific ESG sub-categories such as climate will continue, true ESG integration is only achievable if both investment and non-investment professionals across all asset classes and functions think ESG. This perceptual shift is what can position and empower ESG leadership to focus on strategic external and internal activities of profound impact.

In our experience, the most effective way to build an “ESG mindset” is to make ESG part of your vision, mission, and culture. Embedding ESG into your company’s values, beliefs, attitudes, and behaviors will eventually shape and support the required culture change. While the endorsements of the Board, CEO, and the executive team are key, companies must also cultivate organizational self-awareness relative to the existing culture and how it is experienced. With this in mind, here are a few best practices for elevating the stature, influence, and impact of ESG integration within your organization:

• Communicate key ESG concepts regularly. Proactively identify opportunities for ESG integration through the steady exchange of ideas and information. Address ESG-related issues as they arise, immediately.
• Measure the impact of ESG integration. Highlighting what an ESG culture looks like provides employees with cues and benchmarks for how to practice it and what success looks like.
• Upskill all employees in the concept and practice of ESG as it relates to their area of specialty.
• Designate and empower individuals throughout the organization to address and communicate ESG topics on a consistent basis.
• Encourage all asset classes and functions to participate in industry forums.
• Make ESG a performance benchmark for assessing both leaders and individuals within the organization.

Developing a mindset is the direct result of consistent behavior. By giving ESG the organization-wide prominence and pride of place it deserves, the investment management industry can create a chain of positive impacts that will be felt by our companies, our people – and our planet – for years to come. To access a PDF version of this report, please click here.