Sustainable Investing in Practice: Objectives, Constraints, and Limits to Impact

We survey 509 equity portfolio managers from both traditional and sustainable funds on whether, why, and how they consider firms’ environmental and social (“ES”) performance. ES performance influences stock selection, engagement, and voting for over three quarters of investors, including nearly two thirds of traditional ones. The primary motivation is financial, even among sustainable funds, with few willing to sacrifice financial returns for ES performance. A second driver is constraints, such as fund mandates, firmwide policies, and client wishes, which affect 72% of investors (62% from traditional funds). ES impact is seen as much less important, even for sustainable investors.