The role of institutional investors in promoting ESG goals in the EU

In order to assess the real capacity of institutional investors to promote stewardship policies aimed at improving the ESG performance of companies in their portfolios, it is first necessary to consider whether, and within what limits, institutional investors are legitimised to pursue ESG objectives in their investment strategies. Indeed, it is clear that engagement initiatives are only justified to the extent that ESG objectives are also taken into account in investment strategies5. Secondly, the incentives or economic disincentives for ESG engagement need to be considered. Finally, consideration should be given to how sustainability legislation applicable to institutional investors is likely to stimulate the implementation of ESG engagement initiatives.