ESG Trends – Europe and US


New York – US investors do not seem to be as concerned with ESG issues as their European peers. Not surprisingly, the demand for ESG research in the US is still lagging behind Europe. Integrity has been analyzing some interesting trends in ESG research in the US and abroad.

The last few years have witnessed increasing concerns related to environmental, social, and governance (ESG) issues at different levels – even among institutional investors. According to SocialFunds – a finance site devoted to analyzing topics related to socially responsible investing –  ESG funds, governmental initiatives, and corporate measures have proliferated worldwide in the last decade. The site contains multiple examples of banks, funds, and corporations around the world that have aligned their efforts and resources with ESG issues (e.g. Fuji, Glass, Lewis & Co., and TD Asset Management, among others).

In addition to the measurable increase in ESG-oriented businesses, there are other indicators that suggest the prominence of ESG issues in the investment arena.  One of these indicators is the development of the United Nations’ Principles for Responsible Investment (PRI). A survey conducted among the signatories to the Principles reveals a higher integration of ESG issues within investment practices. The surveyed signatories revealed that they are increasingly engaging in practices such as revisiting relationships with service providers, interacting with policy makers, and tightening their reporting practices to include ESG issues, among others. Furthermore, the number of signatories to the Principles has more than doubled in 2008 to 381 parties, which represent US $14 Trillion in assets under management.

Despite the enthusiasm surrounding a perceived increase in ESG measures at the corporate level, we at Integrity have not witnessed a corresponding impact on the use of ESG research, particularly in the US. Our database reveals that the formation of ESG research providers worldwide has dramatically decreased in the last two years in comparison to the boom of ESG research firms in the first five years of the 21st century. The following chart illustrates this phenomenon:

Number of ESG Research Firms Founded, by Year

Source: Integrity Research

Taking a closer look at the number of ESG research providers in each region we noticed that the US is lagging behind Europe in the number and variety of ESG providers. Combining US and Canada, our database includes 18 providers (of which, a large percentage are specialists in corporate governance). Comparably, Western Europe includes 23 providers, including an institutionalized network of providers that unite their efforts in order to provide comprehensive and unique ESG research.

The ESG research space in the US includes unique and reliable providers, but we have not witnessed a significant increase in the number of firms. Conversely, European countries seem to be dedicating efforts to improve their already robust ESG research space.

ESG Firms by Region

Source: Integrity Research

The slow increase of ESG research providers in the US may be a result of a low demand. One might think that American investors do not see a direct link between stock performances and ESG issues. Having its roots in the early 1800’s as a religious initiative, and now institutionalized as intergovernmental initiatives (i.e. PRI), ESG have found opposition in some people who argue that ethical motivations might be financially unsustainable, therefore they should not guide investment decisions.

Integrity Research will continue to dig deep into this issue. Our goal is to uncover American and European investors’ real perceptions regarding ESG research.


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