Reserves managers are beginning to address ESG - Survey
Summary
The most popular ESG strategies across respondents are negative screening of sectors with adverse sustainability impacts.
ESG and Trends in Reserves Management, a new report by Morgan Stanley Investment Management and the Institute of International Finance (IIF) says there is growing interest in environmental, social, and governance (ESG) assets amongst reserves managers.
Published this past June, Morgan Stanley and IIF conducted the survey for the report in late 2019. Forty institutions responded to the survey, representing over $2.5 trillion in assets. According to the report, a majority of respondents were central banks, although a handful of participants were international institutions. Half the respondents were from Europe, with the remainder spread across Latin America, Africa, the Middle East, Asia and North America.
The most popular ESG strategies across respondents are negative screening of sectors with adverse sustainability impacts, followed by investment in green, social or sustainability bonds, with many expressing an intention to increase exposure in the next 24 months. Moreover, ESG is beginning to be considered as an additional dimension of the liquidity-return-capital preservation framework.
While ESG considerations are becoming increasingly important for reserves managers, the level of explicit commitment to ESG strategies into the reserves management framework remains low. “We are in the process of defining what role ESG will play in the management of our discretionary investment assets,” stated one respondent.
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