Understanding Institutional Investors’ Perspective on ESG Ratings

Investors are increasingly integrating ESG factors into their investment process, as evidenced by the rapid growth in ESG-related assets under management globally. ESG integration influences the strategic objective setting, portfolio management, risk management and stewardship and engagement efforts of investors. Many corporate issuers across regions are therefore expecting more scrutiny from their investors and boards on their ESG and sustainability strategies. Understanding ESG risks and opportunities from the perspective of investors could be valuable for issuers.

This report aims to provide issuers with a sense of how investors may think about ESG factors across the entire investment process. The report also highlights how several academic studies have found MSCI ESG Ratings to be at the forefront of capturing potentially financially material ESG risks and opportunities in equities and corporate bonds. Our research shows that MSCI ESG Ratings have also positively correlated with company profitability and stock performance.

ESG integration into the investment process

Source: MSCI ESG Research