ESG a factor in investment decisions

Our 2022 survey found ESG risk factors continue to play a role for all kinds of investors and advisors in selecting investments.

Barriers to greater adoption of ESG investments across portfolios

57% of institutional respondents indicated the lack of quality and consistent ESG data holds back greater integration across portfolios; so much so that 77% agree regulatory intervention is necessary to ensure better data.

Nearly half of institutional investors said their concerns about general financial market volatility and downside risks remain a significant barrier to more portfolio-wide ESG adoption.

2022

Now, 77% of advisors or advisory firms consider ESG factors when making investment recommendations, up from 67% in 2021.

Most investors continued to increase their ESG and responsible-investing fluency in the face of market and economic headwinds. Discussion is ramping up: 92% of advisors said they had a client ask about ESG, and more than three-quarters of high-net-worth investors report asking an advisor or wealth manager about ESG. Traditional financial factors still dominate institutional portfolio construction, but more than 50% of investors indicated their intent to invest using ESG-related strategies. Mary Green Client Portfolio Manager for ESG

- Mary Green

77%

More than half of financial advisors indicate ESG investing is not a priority for their clients at this time. Only 6% of HNW investors checked “not a priority for me” as a barrier to further ESG consideration at a portfolio level.

2022

Up from 56% in 2021, agree social factors are more important now; defense and firearms production (60%) and data privacy and security (57%) top the list today.

Investment allocators are primarily accessing ESG or responsible investments through actively managed vehicles compared to all other vehicles.

Agree on the importance of social factors when thinking about investment risk; DE&I (57%) and supply chain resiliency (56%) are today’s top issues.

Agree on the importance of social factors; data privacy and security (62%) and supply chain resiliency (59%) are currently top of mind.

The 2022 Federated Hermes ESG Investing Survey is a survey of U.S. investment professionals (institutions, financial advisors, and high-net-worth individuals) with input on investment portfolios regarding their views on responsible investing and consideration of environmental, social, governance (ESG) factors. An anonymous, online survey of respondent panels provided by Phronesis Partners was fielded between July 10, 2022, and August 17, 2022. Respondents included 101 institutional asset owners with more than $500 million in assets under management, including foundations, endowments, public defined benefit plans, corporate defined benefit plans, and insurance general accounts; 200 financial advisors and wealth managers with client assets under management (advisement) of more than $25 million, including registered investment advisors (RIAs), broker-dealer, bank and insurance-affiliated advisors, as well as consultants; and 101 high-net-worth individuals with investable assets (excluding primary residence) of more than $1 million. The survey findings were augmented by 12 anonymous interviews of randomly selected survey respondents.

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About the survey

DISCLOSURES ESG factors may be considered in the investment analysis process in a manner that is complementary to and enhances the fundamental research and analysis process. Certain ESG factors may help identify business and operational risks or opportunities and add a contextual dimension to the overall evaluation of a security. Like any aspect of investment analysis, there is no guarantee that an investment strategy that considers ESG factors will result in performance better than or equal to products that do not consider such factors. Not FDIC Insured May Lose Value No Bank Guarantee Federated Securities Corp. 22-40648 (11/22)

Survey

Investing

ESG Investment

2022

Institutional investors

Financial advisors

High-net-worth individuals

63%

58%

70%

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Social and other non-climate ESG factors remain top of mind

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Environmental, Social and Governance

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United States

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Environmental, Social and Governance

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Incorporated

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Environmental, Social and Governance

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DISCLOSURES ESG investments may be viewed as “sustainable,” “responsible” or “socially conscious,” among other names. ESG factors may be utilized and evaluated differently by different investment managers and may mean different things to different people. Investing based in part on ESG factors carries the risk that, under certain market conditions, the investment strategy may underperform strategies that do not utilize such factors. The application of responsible investment criteria may affect exposure to certain sectors or types of investments and may impact relative investment performance depending on whether such sectors or investments are in or out of favor in the market. An investment’s ESG performance or an investment manager’s assessment of such performance may change over time. The successful application of ESG factors is dependent on an investment manager’s skill in properly identifying and analyzing material ESG issues, and the suitability of ESG investments may change over time. Not FDIC Insured May Lose Value No Bank Guarantee Federated Securities Corp. 21-40533 (11/21)

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Corporation

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Environmental, Social and Corporate Governance

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Environmental, Social and Governance

Social and other non-climate ESG factors remain top of mind

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Environmental, Social and Governance

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Environmental, Social and Governance

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Diversity, Equity and Inclusion

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Environmental, Social and Governance

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Environmental, Social and Governance

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High-net-worth

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Environmental, Social and Governance

Now, 77% of advisors or advisory firms consider ESG factors when making investment recommendations, up from 67% in 2021.

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Environmental, Social and Governance

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Environmental, Social and Governance

2022

77%

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