Environmental, social, and corporate governance investing might dominate the public conversation around institutional portfolios, but only the largest public pension funds in the U.S. have made significant headway in adopting impact investments. For smaller- and mid-sized defined benefit plans, a fully-integrated ESG portfolio remains a distant dream.
According to a survey from Cerulli Associates, 20 U.S. public pension plans are listed as members of Climate Action 100+, an initiative to fight climate change through corporate governance. Ninety percent of respondents believed public pensions will have a moderate-to-high demand for ESG strategies in the next two to three years. When compared to other allocators, public defined benefit plans’ demand for impact investment strategies fell in the middle of the pack. The survey showed that family offices, high net-worth individuals, and foundations had even higher demand for ESG strategies in 2020.