New York, NY – Over the past decade, socially responsible investing and the research alligned with this investment style — currently called Environmental, Social, and Governance (ESG) research — has gotten an extremely bad name in the US for the lack of analytical rigor and the poor performance of most investment funds based on this approach.
In recent years, the market has been changing for ESG research as interest from retail and institutional investors in being more socially responsible and eco friendly has been on the upswing. In addition, a growing number of institutional investors have introduced an assessment of corporate governance procedures into their research process. However, the most important development that has made ESG research more widely regarded in the US has been the growing acceptance of carbon credits and the actual financial impact this will have on corporations.
According to the Financial Times, the regulated market for carbon credits is expected to more than double in size to about $68.2 billion by 2010, with the unregulated voluntary sector rising to $4 billion over the same period.
Based on Integrity’s analysis, we have identified and databased just over 1,500 firms that provide investment, primary, and industry research to institutional investors. Of this total, close to two dozen alternative research firms focus on either ESG or Governance Research in the US and Europe.
A few of the most well-known ESG or Governance research firms include Innovest, KLD, and Governance Metrics. Last year, Goldman Sach’s Hudson Street business made a minority investment in ESG data provider, Asset4.
However, the difference in each of these research firms, the scope of their product offerings, the commercial terms associated with these firms’ research, and the fit to a specific clients’ needs varies greatly on a firm by firm basis. This is one reason why a number of buy-side investors have engaged Integrity Research on an advisory basis to help them identify, analyze, and recommend innovative and unique research partners who best meet their needs and who can add value to their investment process.