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 incorporate firms’ environmental and social (“ES”) performance into investment decisions. ES performance influences stock selection, engagement, and voting for over three quarters of investors, including nearly two thirds of traditional investors. The primary motivation is financial, even among funds marketed as sustainable. Few are willing to sacrifice financial returns for ES performance, largely due to fiduciary duty concerns. A second driver is constraints, such as fund mandates, firmwide policies, and client wishes, which led 72% to make stock selection, voting, or engagement decisions they otherwise would not have. Achieving ES impact is seen as much less important, even among sustainable funds.