GMI Blog “A Boom in the “G” of “ESG””

The following summary appeared as part of Governance Metrics International’s GMI Blog. GMI is the leading independent provider of global corporate governance and ESG ratings and research. Corporate stakeholders – including leading investors, insurers, auditors, regulators and others – use GovernanceMetrics services to identify and monitor risks related to non-financial measures covering key environmental, social, governance and accounting risk factors.

(By Kimberly Gladman, CFA, Ph.D., Director of Research and Risk Analytics) The US-SIF 2012 Trends Report released this week shows that the practice of responsible investment has grown by 22% in the United States over the last two years. It now accounts for $3.74 trillion in assets under management–more than 11% of all assets under professional management in the country. The report details the diversity and increasing sophistication of responsible investment strategies being used in the US both by money managers and by institutional asset owners, who account for three-quarters of the AUM in this space. (For more, see the executive summary.)

From GMI Ratings’ perspective, one of the highlights of the report is the news that corporate governance issues affected $914 billion in institutional investor capital at the end of 2011, a 161% increase from two years earlier. The top three governance issues involved are all significant focus areas for GMI’s research and data collection. Executive pay tops the list, and is applied to the management of $778 billion. It is followed closely by board quality issues, which affects $775 billion in AUM. Consideration of companies’ political contributions affects $459 billion, ranking as the eighth-most prominent ESG factor used in asset-weighted terms.

As the report notes, the data indicate that institutional investors are broadening their approach to corporate governance—a longtime theme of shareholder advocacy—by incorporating it into investment analysis and decision-making.

The Board Director Training Institute (BDTI) is a "public interest" nonprofit in Japan dedicated to training about directorship, corporate governance, and related management techniques. It is certified by the Japanese government to conduct these activities as a regulated nonprofit. Read a summary about BDTI here, and see a menu of its services for both corporations and investors here.

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