Investors should make engagement objectives clearer and encourage social accountability to enhance returns from environment, social and governance policies, a new academic study has concluded.
In a report entitled “How ESG Engagement Creates Value for Investors and Companies,” Cass Business School academics said that investors should be more open on engagement with companies and encourage ESG analysts and financial analysts to work more closely.
“Communicative value can also be increased through improved public transparency and disclosure – and hence social accountability – of how engagement processes are initiated, executed, managed, monitored and evaluated,” the report said.
“Political benefits can be derived internally if ESG and financial analysts work more closely together on engagements.”
The report, which was sponsored by the Principles for Responsible Investment, included interviews with 36 representatives from large listed companies and research on the engagement practices of 66 institutional investors.
In an interview with ESGClarity.com, prior to the launch of the report, Honor Fell, a vice president at investment consultant, Redington, said while some asset owners have become more sophisticated in assessing ESG issues, there are still a great many who need further assistance.
“Generally, I think there are a few leaders,” she said. “Look at the HSBC Pension Fund, NEST and the Environment Agency Pension Fund. They are pushing their advisers and consultants to find new solutions, but they are sadly not the majority. Everyone in the whole investment chain needs to get a bit more proactive.”
