This document summarizes the results of a survey conducted by Callan Institute regarding asset managers' approaches to environmental, social, and governance (ESG) investing. The survey found that larger asset management firms are more likely to have formal ESG policies and sign the UN Principles for Responsible Investment. Over half of firms surveyed do not have an ESG policy, but interest is growing. Larger firms see greater opportunities in ESG strategies and expect increasing client demand from the US, Canada, and Europe.

1. Knowledge. Experience. Integrity.
CALLAN
INSTITUTE
Survey
June 2016
Asset Managers and ESG
Sensing Opportunity, Bigger Firms Lead the Charge
Environmental, social, and governance (ESG) investing is not a new phenomenon, but it has been expe-
riencing rapid growth and change in the U.S. marketplace. To better understand how asset managers are
addressing investors’ changing needs in this space, Callan queried these firms on their ESG views and
policies. Our survey reveals that the majority of large asset management firms are formalizing their efforts
around ESG implementation, via firm-wide policies, third-party affiliations, and other actions, while smaller
firms have yet to exhibit widespread adoption.
Small
23%
Medium
51%
Large
73%
Firms with
a formal
ESG policy
(by size)
small: <$50bn
medium: $50bn – $250bn
large: >$250bn

2. 2
Part of being a sound fiduciary
was another popular reason for
adopting ESG with
56%
26% of those not adopting
ESG feel ESG factors are already
accounted for in their current
investment process
41%of all respondents have a
formal ESG policy
Has your firm signed the
Principles for Responsible
Investment (PRI)?
40% Yes
53% No
7% Not Sure
Results reflect responses from 180 asset management firms representing more than $42
trillion in assets under management (AUM). While more than half of asset management
firms (56%) do not have a formal ESG policy, and a similar percentage (53%) have not
signed on to the United Nations Principles for Responsible Investment (PRI), the firms
that have pursued these initiatives cite growing client demand as the primary motivation.
For this survey we examined managers by size groups: small (less than $50 billion),
medium ($50 - $250 billion), and large (greater than $250 billion). A greater proportion of
large firms (73%) versus small firms (23%) have a formal ESG policy at the firm level (as
opposed to on a strategy level). The same trend is true for PRI signatories: 82% of large
firms versus 20% of small firms. Further, larger firms tend to be more established in the
space: more than one-quarter (27%) of large firms created their ESG policy more than a
decade ago, compared to 21% of medium firms and 16% of small firms.
59%
cite client demand
as their reason for
adopting ESG
16%
Small 62%
22%
27%
Large 36%
21%
Medium 42%
37%
37%
When was your
firm’s ESG policy
established?
Within past 2 years
3–10 years ago
> 10 years ago
35%
of firms with no ESG policy
have considered adopting one
within the last year
Note: Multiple responses allowed.

3. 3Knowledge. Experience. Integrity.
What research process is
utilized at your firm?
Managers with an
ESG Policy by
Research Process
Quantitative, factor/model
driven approach
Combination of fundamental &
quantitative
Fundamental, bottom-up research*
* this includes basic screening
10%
31%
59%
QuantitativeComboFundamental
53%
51%
33%
How is research organized
within your firm?
Multiple boutique model
Central research platform
Team-based approach
Managers with an ESG Policy by
Research Organization
11%
60%
Multiple boutique Central Team-based59% 45% 36%
29%
We also posed questions around research
processes and discovered that firms with
fundamental, bottom-up research are less
likely to have a formal ESG policy (33%) than
those with a quantitative approach (53%) or
that use a combination of research processes.
Research organization also mattered. Asset
management firms that implement a multiple
boutique model are more likely to have a
formal ESG policy (59%) than those with
centrally organized research (45%) or team-
based approaches (36%).
Respondent Perspective
“We believe that responsible
investing is a core component of
traditional investing. Governed,
sustainable businesses have
the potential to generate strong
results over time.”

4. 4
41%
of respondents say ESG
strategies present a market
opportunity going forward
Looking forward, all sizes of asset management firms expect client interest in ESG
investing will grow. However, just 41% of the respondents see this marketplace shift as an
opportunity. Again, larger firms tend to be more optimistic about future growth, with nearly
100% sensing slight or significant increases in client interest.
Asset managers that project growth in client interest expect to see that interest coming
from the U.S. and Canada (72%) and Europe (57%). This reflects the survey respondent
population, who are primarily based in the U.S. and Europe, but may also reflect the notion
that European investors are further along in integrating ESG into investment decision
making than their North American counterparts.
Over the next 3-5 years, how do you expect
client interest in ESG to change?
Where is this increased interest likely to come from?*
Increase
Slightly
Increase
Significantly
Small Medium Large
U.S. and
Canada
Europe
Asia
Emerging
Australia
72%
57%
16%
5%
4%
100%
88%
76%
* Multiple responses allowed.
Around one-third of managers
with a formal ESG policy
expect it will help them
achieve higher risk-adjusted
returns and improved risk
profiles over the long term
Respondent Perspective
“We believe that environmental,
social and governance (“ESG”)
issues play an important role
in the global economy, both
from a business and investment
perspective.”
“Incorporating ESG factors
into the research process
is part of ensuring all risks
and opportunities that could
influence the growth potential of
the company in question have
been considered.”

5. 5Knowledge. Experience. Integrity.
Size
matters
larger asset management
firms are taking more
actions on ESG
96%
of respondents are
active managers
Respondents by Size
How many unique strategies does your firm manage?
We provide further detail on the demographics of respondent firms for reference. Rough-
ly half of the 180 asset management firms that responded to our survey are small (less
than $50 billion in assets), and around a quarter are either medium ($50 – $250 billion)
or large (greater than $250 billion). Respondent firms had a median of $56 billion and an
average of $232 billion in AUM. The vast majority of respondent firms actively manage
their strategies (96%). As one would expect, the smaller respondent firms manage fewer
unique strategies.
Key Takeaways
For asset management firms, it’s clear that size matters when it comes to ESG in-
tegration. Large firms are more likely than smaller firms to have formal, firm-wide
ESG policies, be PRI signatories, and have significant expectations of growing client
interest in the space.
Small
<$50bn
53%
Medium
$50bn – $250bn
25%
Large
>$250bn
22%
0 - 5
6 - 10
11 - 25
Over 25
Small Medium Large
100%
65%
30%
8%
37%
29%
26%
5%

6. 6
Certain information herein has been compiled by Callan and is based on information provided by a variety of sources believed to be
reliable for which Callan has not necessarily verified the accuracy or completeness of or updated. This report is for informational pur-
poses only and should not be construed as legal or tax advice on any matter. Any investment decision you make on the basis of this
report is your sole responsibility. You should consult with legal and tax advisers before applying any of this information to your particular
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If you have any questions or comments, please email institute@callan.com.
About Callan Associates
Callan was founded as an employee-owned investment consulting firm in 1973. Ever since, we have
empowered institutional clients with creative, customized investment solutions that are uniquely backed
by proprietary research, exclusive data, ongoing education and decision support. Today, Callan advises
on more than $2 trillion in total assets, which makes us among the largest independently owned invest-
ment consulting firms in the U.S. We use a client-focused consulting model to serve public and private
pension plan sponsors, endowments, foundations, operating funds, smaller investment consulting firms,
investment managers, and financial intermediaries. For more information, please visit www.callan.com.
About the Callan Institute
The Callan Institute, established in 1980, is a source of continuing education for those in the institu-
tional investment community. The Institute conducts conferences and workshops and provides pub-
lished research, surveys, and newsletters. The Institute strives to present the most timely and relevant
research and education available so our clients and our associates stay abreast of important trends in
the investments industry.
© 2016 Callan Associates Inc.
About The Author
Mark R. Wood, CFA, is a Vice President and U.S. equity investment consultant
in Callan’s Global Manager Research group. Mark is responsible for research and
analysis of U.S. equity investment managers and assists plan sponsor clients with
U.S. equity manager searches. He meets regularly with investment managers to
develop an understanding of their strategies, products, investment policies, and
organizational structures. As a member of Callan’s ESG Committee, Mark covers
matters related to sustainable investing. Mark joined Callan in 2013.
Prior to joining the Global Manager Research group, Mark worked as the Senior Research Analyst for Cook
Street Consulting, Inc., a boutique consulting firm based in Denver, CO. He was responsible for investment
manager searches and due diligence for U.S. equity, fixed income, and target date asset classes.
Mark graduated from the University of Colorado, Boulder in 2007 with a BS in Finance and Business
Administration. He has earned the right to use the Chartered Financial Analyst designation.

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