Global Sustainability A Primer on Environmental, Social and Governance (ESG) Investing in the United States

We analyze the state of ESG investing in the United States, focusing on key drivers, implementation approaches, and pivotal questions for its future direction.

Rise of Principles for Responsible Investing (PRI) Assests (US$ Trillion)

Source: UNPRI

This chart shows the rise in principles of responsible investing.

ESG investing in the United States is at an inflection point

Over the past fifteen years, there has been a significant increase in interest amongst investors, business leaders and regulators on the topics of ESG investing, sustainability and sustainable development. At the same time, the complexity and challenges of implementing ESG investing have risen. Where does ESG go from here?

ESG means different things to different investors

There is no single common definition, approach, underlying set of beliefs, market size or implementation process around ESG investing. We believe that investors should develop clear perspectives on five key pillars that underpin ESG investing: public policy, corporate sustainability initiatives, technological change, social norms and materiality of ESG factors. We provide our perspectives on the pivotal questions for each pillar.

Integrating ESG at the sector level

On p. 23 we sketch out our ESG Integration Roadmap, and on pp.17-18 we describe the ESG Industry Postcards, where we analyze the impact of ESG drivers on industry competitive landscapes and collaborate with covering analysts to tease out material ESG issues and the investment implications for sectors and companies. Please refer to our new ESG Industry Postcards in the following US sectors: Exploration and Production, Utilities, Machinery, Engineering & Construction and Software.

US public policy on ESG issues should be top of mind for investors

We are particularly mindful of the public policy dimensions of ESG investing in the United States. We note that there have been important discussions around ESG investing by the SEC, Department of Labor and Department of Energy. We also note that environmental and social policies are evolving and highly divergent at the state level vs the federal level. Having a a clear focus on where public policy goes next on ESG is critical for the future of the space.

Authorized clients of UBS Investment Bank can log in to UBS Neo to read the full report.