October 02, 2012

Public Pension Plans More than Twice as Likely to Implement SRI/ESG Strategies than Corporate Plans, says BNY Mellon

35% of public pensions have a socially responsible investing component, compared to only 16% of corporates; portfolio screening still prevalent but shareholder advocacy on the rise

NEW YORK, October 2, 2012 — Public pension plans in the U.S. and Europe incorporate Socially Responsible Investing (SRI) and Environmental, Social and Governance (ESG) concepts into their portfolios at more than twice the rate of corporate plans, according to a new survey by BNY Mellon.  The survey found that, overall, 24% of responding clients have implemented SRI/ESG strategies within their investment process, representing more than $200 billion in assets.

In early 2012 BNY Mellon surveyed its asset owner client base of more than 1,100 institutions as part of its on-going effort to understand and support client needs relative to SRI/ESG.  The survey focused on if, how, and why clients incorporate an SRI approach into their investment process.  Respondents were broken down by plan type – corporate pensions, public pensions, foundations & endowments – and segmented by size and region.

Socially responsible investing integrates environmental, social, governance and ethical issues into financial analysis and decision-making.  In today's world, it goes beyond the narrow view of "negative screening" often associated with SRI and now includes more proactive practices such as impact investing, shareholder advocacy/activism, and community investing.

Highlights from the survey include:

  • 35% of public pension funds have adopted SRI/ESG strategies, compared to 27% of foundations & endowments, and 16% of corporate pension plans. Concerns around ERISA weigh on U.S. corporate clients, with debate about their role as a fiduciary when integrating ESG investing
  • 80% of firms believe there's no performance trade-off between SRI/ESG strategies and traditional investments
  • Over a third of respondents expect SRI to be more important in the future
  • Screening is the most prevalent approach in how clients implement ESG strategies
  • Main SRI focus areas continue to be in the categories of human rights, weapons and tobacco
  • Many investors rely on their managers to monitor the SRI/ESG screens they put in place. BNY Mellon advocates independent monitoring as a best practice.

"Our research suggests there may be a stronger link between public pension funds' investment strategies and their organizational values than exists with corporate pensions," said Greg Stewart, managing director of client solutions at BNY Mellon.  "Interestingly, even the vast majority of those who see a performance trade-off between SRI and traditional strategies are still very likely to continue their SRI/ESG over the next two years, perhaps implying that values trump performance in this arena."

To view the full paper, Trends in Environmental, Social, and Governance Investing, please visit:

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BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team. It has $27.1 trillion in assets under custody and administration and $1.3 trillion in assets under management, services $11.5 trillion in outstanding debt, and processes global payments averaging $1.4 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Learn more at www.bnymellon.com or follow us on Twitter@BNYMellon.