The investor perspective on ESG reporting

The investor perspective on ESG reporting

Watch the on-demand version of the Think ESG: The investor perspective on ESG reporting webcast.

In brief

  • EY professionals hosted a webcast featuring a diverse panel of investors to discuss their perspectives on environmental, social and governance (ESG) reporting.
  • They shared their experiences using ESG and corporate reporting to enable their investing and voting decisions. 
  • They also highlighted market trends associated with ESG and its increased importance in investment consideration and analyses. 

On September 21, 2021, EY professionals hosted the Think ESG webcast addressing the investor perspective of environmental, social and governance (ESG) reporting, featuring a panel representing a diverse intersection of investors. They shared their experiences in using corporate reporting to enable their investing and voting decisions, with a particular focus on what investors consider important with respect to ESG reporting, and how ESG impacts their investment decision-making. They highlighted market trends associated with ESG and its increased importance in investment consideration and analyses.

Teacher Presenting Investment Strategy

Chapter 1

The investor landscape

The investor community is diverse and often has varying perspectives on ESG reporting.

While investors are often mentioned as a single population with mostly common needs, in reality there are different subsects of the investor community that may take a different approach, resulting in varying perspectives on ESG reporting, such as:

  1. Asset owners include organizations, such as insurance companies and pension funds, that invest with a long-term horizon to support their long-term obligations (e.g., life insurance, annuities and pension benefits). As they invest their funds with asset managers, such as passive index funds, they’ll ask questions about the long-term sustainability attributes of the investment and cite ESG factors that their investment mandates would consider.
  2. Passive (or index fund) asset managers invest in companies through an index comprising several or many companies. Their returns will benefit if the companies in the index prosper over the long term. As such, they have an incentive to engage with companies to encourage longer-term thinking. They see a company’s maturity around ESG as a means to long-term value creation, which will likely ultimately generate greater returns for their investment strategy.
  3. Active investors buy, sell or hold shares and often trade them. They are also known as “buy-side” investors. They may hold individual shares for a short, medium or long term.
  4. Sell-side analysts also play a role in the system, asking questions on earnings calls about ESG, as well as publishing research reports with recommendations for their clients about whether to buy, sell or hold shares.
Group of People Analyzing Data.

Chapter 2

Investor ecosystem

The investor ecosystem is made up of different types of interconnected investors with varying long-term priorities.

The following represents the investor ecosystem and how the different types of investors are interconnected, specifically highlighting how the long-term priorities of asset owners influence the actions of other investors.

Asset owners are increasingly influencing asset managers to focus on longer time horizons.

Asset owners

Asset managers


  • Insurance companies
  • Insurers
  • Sovereign wealth funds
  • Wealthy individuals
  • Passive index funds
  • Active asset managers:
  • Long-only mutual funds
  • Hedge funds 
  • Stocks
  • Bonds
  • Real estate
  • Private equity


  • Asset preservation and creation
  • Duration match assets for long-term liabilities (e.g., pension benefits, insurance claims)


  • Obtain invested capital and maximize assets under management by asset owners
  • Maximize earnings


  • Obtain invested capital
  • Minimize cost of capital
  • Maximize market capitalization


  • Ensure investments sustain long-term value
  • Engage with asset managers to embrace principles into fundamental investing


  • Meet demands of assets owners and, therefore, invest with focus on either long- or short-term profits, or both


  • Meet demands of asset managers
  • Engage with broad investor base
Businessman Clicks a Bond on Virtual Screen

Chapter 3

Asset owner perspective

Asset owners use ESG information in a variety of ways.

1. How do asset owners use ESG information?

Asset owners’ goals are to maximize returns while reducing risk. Asset owners look to ESG information to achieve both goals through engagement with investee companies and proxy voting. The California State Teachers’ Retirement System (CalSTRS) engages with hundreds of companies each year. It expects the board members of companies to actively think about overseeing management and corporate disclosure of the priority ESG issues that are relevant to the business, which relate to the company’s long-term strategy and performance. ESG information is also used in portfolio construction decisions. Stronger ESG performance likely results in a higher portfolio weighting.

2. Are there particular broadly relevant ESG topics that companies should think about disclosing?

CalSTRS engages with companies on a number of priorities. For example, one is to understand how a company is preparing to transition to a lower carbon economy. Therefore, CalSTRS is interested in a company’s goals for achieving lower, or net–zero, emissions. In terms of climate, asset owners are looking for disclosures of Scope 1, 2 and 3 emissions, as well as TCFD reporting. Human capital management information is also a priority disclosure that is reviewed — such as diversity in the workforce and how human capital management is included in decision-making for the company. Additionally, CalSTRS wants companies to utilize SASB disclosures as it provides industry-specific information in a comparable format.

Business people in Meeting

Chapter 4

Passive asset manager perspective

Highlights on how BlackRock uses ESG information throughout the proxy season.

1. What were some of the key themes heading into the 2021 proxy season for BlackRock?

There was a focus on a number of areas, such as board quality and effectiveness incentives aligned with value creation, climate and natural-capital strategy, purpose and financial resiliency, and the company’s impact on people. There was a specific focus on diversity, equity and inclusion, specifically board and workforce diversity. Around climate and natural capital, the intent was for engagement teams to ask companies to enhance disclosures by including SASB- and TCFD-aligned metrics, along with a clear climate reduction plan.

2. How did those priorities play out in actual proxy voting in 2021?

There was a large step-up in terms of support of shareholder proposals — 35% vs. 17% in the prior year. Engagement was deepened, particularly around climate. Notably, approximately 65% of companies BlackRock had a focus on in the prior year made meaningful progress.

3. How do you typically engage with companies during the year?

During the off-proxy season, BlackRock may prioritize companies for engagement based on the assets under management, as well as the percentage of holding. BlackRock may also use the off-season to take a deeper dive into ESG factors that were not able to be addressed during the proxy season. Companies should not interpret engagement by BlackRock to be a negative. Instead, oftentimes it may be more of a check-in to understand how a company is progressing toward its goals and targets.

Stock Market Business Growth Concept

Chapter 5

Sell–side analyst perspective

How sell-side analysts use ESG information to analyze the impacts on equity valuations and other aspects.

1. What has been your journey as a sell–side analyst in thinking about ESG?

Scotiabank analysts found that including nonfinancial information with financial information gives a better, more complete understanding of the mosaic for any given stock or industry. In order to better understand this, and the impacts on equity valuation, it became clear that there needed to dedicate a full-time role to ESG.

2. As you’re talking to the buy side, what are some of the ESG items that resonate the most?

It’s important to think about ESG information as both quantitative and qualitative. While the former allows for trend analysis and peer comparison, the narrative sections can provide necessary context for items of thematic importance. Scotiabank built an analytical framework that’s scalable and shows change analysis, which is helpful from a forward-looking perspective. The themes are all thought about within the context of the business: how are companies thinking about fitting ESG into a product life cycle? Why isn’t the composition of companies more diverse, even though studies show that more diverse companies outperform their competitors? These are the questions Scotiabank dives into that clients are most interested in.

3. Have you ever noticed any disconnect between what companies and what investors think around the topic of ESG?

On the corporate side, Scotiabank’s perception is that ESG is often viewed as a box-ticking exercise, which could be a result of being overwhelmed by the different interests and rating agencies that are competing for the company’s time. On the buy side, and as investors in general, Scotiabank analysts simply want to know more deeply whether to invest in any given company — and ESG can provide trust in achieving performance. However, the gap between the buy side and companies is narrowing as the transparency and immediacy of information are providing a more general awareness of what the holders of funds want and what stakeholders see as important in this space.

Group of Young People Working in Creative Office

Chapter 6

Active investor/portfolio manager perspective

How investors and portfolio managers use ESG information to manage investments.

1. How are you incorporating ESG into your investment process? Is it integrated with fundamental portfolio managers? Is it separate? Does this impact buy, sell and hold decisions?

At Wellington, investment professionals integrate ESG across different investment portfolios and platforms. ESG issues might be weighted differently, depending on the product’s particular investment style and objectives. However, Wellington teams are considering ESG more and more as they make buy, sell and hold decisions. They have integrated ESG considerations with fundamental investment analysts and discussions with portfolio managers, which leads to better engagement with the companies Wellington invested in.

2. How do investors like you engage with companies during and outside of proxy season?

Proxy season is part of a continuum of building engagement around the companies Wellington invests in, which happens throughout the year. By building a relationship, Wellington teams get context for decision-making when it comes around to proxy season. Proxy voting is a tool for engagement, but Wellington teams recognize that it may be a blunt tool because they are either voting with or against management. They accompany this with ongoing dialogue outside of proxy season to get a better appreciation for management’s perspective. They also like to have access to board members independently as it helps piece together what management is doing to execute strategy and how the board is complementing and overseeing the management team’s daily operations.

3. Are there particular ESG topics that you find broadly relevant to investors? Is it more sector-based?

There are certainly topics that are broadly relevant across sectors and also there are topics that are more specific to an industry, company or region. Wellington teams use the lens of what is ultimately going to determine long-term shareholder value in narrowing the focus in terms of ESG issues. For example, regulation could be more pertinent for companies in regulated industries, like energy and financial services, while corporate culture and talent strategy are broad topics that apply to almost every investment as they represent issues faced by every company. Climate is also a topic that applies to every company in every sector, and it’s not just an energy-sector issue alone.

Our panel demonstrated that although there are different perspectives from investors around ESG reporting, there are also many commonalities. Investors are continuing and increasingly looking for companies to enhance the breadth and depth of their ESG reporting. Investors are also commonly looking to connect ESG issues to the company’s business model and strategy.


Given the ever-increasing investor interest in ESG investments, and investor consideration of ESG attributes in their investments and in their portfolio composition, it is critical for companies to engage in this topic and involve executives and boards in determining and mapping the ESG issues that are most relevant to the business and aligning ESG disclosures around those more relevant topics with established frameworks. This mapping is often called a “materiality assessment,” though it is not usually meant to imply that the resulting ESG issues are “material” in the same context as in financial or SEC reporting.

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