Environmental, social, and governance (ESG) strategies are quickly evolving in the institutional investment arena. A greater emphasis on ESG from large U.S. institutional investors, consistent media coverage, and greater availability and scope of ESG-themed investment strategies has resulted in an uptick in ESG implementation rates among U.S.-based investors. *In September 2015, Callan conducted our third annual survey to assess the status of ESG factor integration—including responsible and sustainable investment strategies and socially responsible investing—in the U.S. institutional market. The results reflect responses from 242 unique institutional U.S. funds representing approximately $2.4 trillion in assets. *Twenty-nine percent of all survey respondents have “incorporated ESG factors into decision making,”— a broad statement whose meaning varies widely in terms of implementation by organization—up from 26% in 2014 and 22% in 2013. An additional 11% are currently considering doing so. Endowments and foundations are the highest adopters relative to other fund types, though public funds saw a material uptick in incorporation relative to a year ago (15% in 2013 to 27% in 2015). *Corporate funds have the lowest overall integration of ESG factors at 15% in 2015, but this figure is substantially different for corporate defined contribution plans (24%) and corporate defined benefit plans (7%). *The greatest barriers to funds incorporating ESG into investment decision making continue to be a lack of clarity over the value proposition (cited by 47% of respondents that do not incorporate ESG), a dearth of research tying ESG factors to outperformance (45%), and a perceived disconnect between ESG factors and financial outcomes (39%)

1. Knowledge. Experience. Integrity.
ESG Interest and Implementation Survey
Environmental, social, and governance (ESG) strategies are quickly evolving in the institutional in-
vestment arena. A greater emphasis on ESG from large U.S. institutional investors, consistent media
coverage, and greater availability and scope of ESG-themed investment strategies has resulted in
an uptick in ESG implementation rates among U.S.-based investors.
In September 2015, Callan conducted our third annual survey to assess the status of ESG factor
integration—including responsible and sustainable investment strategies and socially responsible
investing—in the U.S. institutional market. The results reflect responses from 242 unique institu-
tional U.S. funds representing approximately $2.4 trillion in assets.
Twenty-nine percent of all survey respondents have “incorporated ESG factors into decision making,”—
a broad statement whose meaning varies widely in terms of implementation by organization—up from
26% in 2014 and 22% in 2013. An additional 11% are currently considering doing so. Endowments
and foundations are the highest adopters relative to other fund types, though public funds saw a mate-
rial uptick in incorporation relative to a year ago (15% in 2013 to 27% in 2015). Corporate funds have
the lowest overall integration of ESG factors at 15% in 2015, but this figure is substantially different for
corporate defined contribution plans (24%) and corporate defined benefit plans (7%).
The greatest barriers to funds incorporating ESG into investment decision making continue to be a
lack of clarity over the value proposition (cited by 47% of respondents that do not incorporate ESG), a
dearth of research tying ESG factors to outperformance (45%), and a perceived disconnect between
ESG factors and financial outcomes (39%).
CALLAN
INVESTMENTS
INSTITUTE
Survey
December 2015

2. 2
Respondent Overview
Callan surveyed U.S. institutional investors on environmental, social, and governance (ESG) factors,
defined for the purposes of the survey as: socially responsible investing (SRI) (including divestment),
sustainable investing, responsible investing, and other associated terms. We collected responses from
242 U.S. funds and trusts that collectively represent approximately $2.4 trillion in assets.
Exhibit 1 details survey respondents by fund type: 29% are corporate funds, 35% public funds, 17%
endowments, 10% foundations, and the remaining 8% are various other types of organizations including
family offices, health care funds, and other non-profits. Exhibit 1 shows respondents by fund size. Thirty-
seven percent have $500 million or less in assets, 28% have between $500 million and $3 billion, and the
remaining 36% have greater than $3 billion.
ESG Factor Adoption Rates
Our survey asked whether or not the fund had incorporated ESG factors into investment decision making.
The language was intentionally broad in order to capture the prevalence of ESG considerations in the in-
stitutional investment arena rather than the specific implementation. The percentage of respondents that
have incorporated ESG factors into decision making continues to grow and hit 29% in 2015, up from 26%
in 2014 and 22% in 2013 (Exhibit 2). Foundations and endowments are the highest adopters relative to
Exhibit 1 Respondents by Fund Type
Corporate
30%
Endowment
17%
Foundation
10%
Other
8%
Public
35%
3%
7%
18%
Oth
er
Corp. DC
Corp. DB
Large
36%
Small
37%
$500mm-$3bn
$3bn-$20bn26%
>$20bn 10% <$500mm
Medium
28%
Respondents by Fund Size
Exhibit 2 Have you incorporated ESG factors into your investment decisions?
All Respondents
201320142015
Yes 22%
No 78%
Yes 26%
No 72%
Not sure 2%
Yes 29%
No 68%
Not sure 3%

3. 3Knowledge. Experience. Integrity.
other fund types: 39% of foundations and 37% of endowments indicate they use ESG factors (Exhibit 4).
Public funds saw a material increase in prevalence relative to two years ago, from 15% in 2013 to 27%
in 2015. Corporate funds have the lowest rates of ESG incorporation at 15%, representing little change
from 14% in 2013 and 16% in 2014. However, this figure is substantially different for corporate defined
contribution (24%) and defined benefit plans (7%).
Exhibit 3 Respondents that have incorporated ESG into investment decisions
By Fund Type
2013, 2014, 2015
By Fund Size
2015
21%
Corp.
DC
22%
Corp.
DC
37%
34%
22%
14%
27%
22%
15%15%
35%
39%
31%
15%
Corporate Public Endowment Foundation
2015 2014 2013
7%
24%
Corp.
DC
Corp.
DB
8%
Corp.
DB
11%
Corp.
DB
The Department of Labor Weighs in on ESG
On October 26, 2015, the Department of Labor published Interpretive Bulletin 2015-01 relating to the
fiduciary standard under ERISA considering economically targeted investments (ETIs), including ESG
investing. The Bulletin does not change the focus of plan fiduciaries—which names the plan’s financial
returns and risk as the top priority. Rather it clarifies that an investment strategy that incorporates ESG
factors can be just as appropriate an investment option as one that does not. The Bulletin states: “Plan
fiduciaries should appropriately consider factors that potentially influence risk and return. ESG issues
may have a direct relationship to the economic value of the plan’s investment.” Prioritizing ESG causes
at the expense of the financial interests of the plan’s participants and beneficiaries continues to be a
breach of fiduciary duty. For more detail, read our spotlight research: “The Department of Labor Weighs
in on ESG: Key Takeaways from Interpretive Bulletin 2015-01” at www.callan.com/research.
>$20bn$3bn-$20bn$500mm-
$3bn
<$500mm
26% 26%
31%
35%

4. 4
Reviewing respondents by region (Exhibit 4), we note only minor geographic disparities. The Central
region has the highest percentage of funds incorporating ESG factors at 33%, followed by the Northeast
(27%). Respondents from the Southeast region have the lowest adoption rate in 2015 at 21%, but this
represents a solid gain from 2014 (12%).
An additional 11% are currently considering incorporating ESG (Exhibit 5), although most funds that have
not incorporated ESG factors into investment decision making have no immediate plans to do so (89%).
Endowments are the most likely to be actively considering it at 26% (Exhibit 6).
Exhibit 5 If you have not incorporated ESG into investment decisions, are you considering it?
All Respondents
Yes 11%
No 89%
Exhibit 6 Respondents that are considering incorporating ESG into investment decisions
By Fund Type
FoundationEndowmentPublicCorporate
6%
7%
26%
14%
Pacific (out of 49 total funds)
Mountain (out of 16 total funds)
Central (out of 73 total funds)
Northeast (out of 52 total funds)
Southeast (out of 43 total funds)
22%
25% 33%
21%
27%
Exhibit 4 Funds that are incorporating ESG factors in investment decisions by region
All Respondents

5. 5Knowledge. Experience. Integrity.
Reasons to Use ESG Factors
Exhibit 7 shows motivations for incorporating ESG into investment decision making across all respondents
and by fund type in 2015. The order of these factors has changed little over the past two years, and the top
reasons cited for incorporating ESG factors into investment decisions remain: “The fund’s Investment Policy
Statement dictates that we consider ESG factors” (49%) and “My fund has other goals besides maximizing
risk-adjusted returns, and we believe that ESG factors can help us attain these other goals” (39%). The third
most popular reason, “We expect to achieve an improved risk profile without sacrificing return,” increased
from 17% in 2013 and 28% in 2014 to 35% in 2015, revealing growing beliefs in the potential for ESG to
have a positive impact on portfolio risk.
Responses by fund type reveal foundations and endowments are driven by the same top two reasons.
Public funds’ top reason is the expectation of achieving an improved risk profile without sacrificing returns
(43%) while 60% of corporate funds are motivated to include ESG factors to fulfill fiduciary responsibility.
0% 75%
40%
64%
33%
11%
20%
56%
56%
50%
24%
29%
33%
60%
0%
43%
0%
14%
22%
20%
38%
29%
10%
7%
19%
33%
Public
Corporate Endowment
FoundationAll Respondents
We expect to achieve higher risk-
adjusted returns over the long term
Other
We expect to achieve an improved
risk profile without sacrificing return
My fund must consider ESG factors
as part of our fiduciary responsibility
My fund has other goals besides
maximizing risk-adjusted returns,
and we believe that ESG factors
can help us attain these other goals
The fund's Investment Policy
Statement dictates that we
consider ESG factors
35%
38%
25%
39%
49%
16%
Exhibit 7 Why has your fund incorporated ESG factors into investment decisions?
Multiple responses allowed. Other responses include: driven by Europe-based parent company; per company’s diversity and inclu-
sion policy which dictates that we consider ESG factors for all vendors, including investment funds within the retirement plan; is re-
quired by state law or other legislation; to meet client and participant requests; used selectively to achieve outperformance; per board
request; ESG is aligned with other institutional priorities.

6. 6
Reasons Not to Use ESG Factors
The majority of U.S. institutional investors (68%) have not incorporated ESG factors into investment deci-
sion making, down from 78% in 2013. The main reasons remain unchanged relative to two years ago and
include: ESG’s value proposition is unclear, a dearth of research tying ESG factors to outperformance,
and a perceived disconnect between ESG factors and financial outcomes (Exhibit 8). Short track records
declined as a barrier to using ESG strategies, from 18% in 2014 to 14% in 2015.
Compared to other fund types, few public funds cite an unclear value proposition (33%) as a reason to not
incorporate ESG factors. The unclear value proposition and lack of research tying ESG factors to outper-
formance loom larger for corporate funds than public funds, endowments, and foundations.
Multiple responses allowed. Other includes: concern over breach of fiduciary responsibility; it has never come up/we have not yet
considered it; we encourage managers to incorporate ESG factors but do not mandate it; we are primarily in index funds; this decision
lies with the external asset managers; initial AUM for these strategies appears to be too small; governance challenges; prudent inves-
tor legislation prohibits it; ESG is a charade playing on investors emotions and misguided political agendas; prohibited by state law;
assume ESG will have a negative impact on performance; ESG conflicts with the mandate to serve the beneficiary.
Exhibit 8 Why has your fund NOT incorporated ESG factors into investment decisions?
0% 70%
63%
57%
33%
58%
43%
48%
50%
23%
50%
37%
31%
17%
4%
19%
4%
48%
29%
12%
17%
29%
29%
15%
28%
13%
7%
17%
21%
22%
26%
23%
36%
13%
All Respondents
0%
10%
20% 30% 40% 50% 60%
Track records are too short
for these types of strategies
Benchmarking is too difficult
(unclear how to measure financial
and non-financial success)
Other
I don’t know how ESG factors
would fit in the fund's strategic
asset allocation
My fund does not have the time
and/or staff resources to devote
to exploring this area
My fund will not consider any
factors that are not purely financial
in our investment decision making
I have not seen ample
research tying ESG
factors to outperformance
It is unclear what the
value proposition is
47%
45%
39%
22%
21%
20%
18%
14%
Public
Corporate Endowment
Foundation

7. 7Knowledge. Experience. Integrity.
Personal Views on ESG
Personal views around ESG have changed little relative to last year. Asked to rank a number of statements
according to their personal opinions, respondents agree most on the concept that engagement is more
effective than divestment (Exhibit 9). Around half of respondents also support the idea (agree or strongly
agree) that ESG investing can have a substantial positive impact on humanity. Respondents disagree that
ESG factors are just as important as traditional fundamental factors (e.g., profitability and valuation) when
evaluating companies, but also disagree that ESG investing is a short-term trend. Interestingly, 40% or more
Considering the
sustainability of the
environment is part
of a fiduciary's duty
Financial outcomes aside,
ESG investing can have a
substantial positive impact
on humanity (society,
environment, etc.)
Engagement is more
effective than divestment
ESG investing might work
in other countries, but the
U.S. market will never
embrace it
ESG investing is a
short-term trend
Overall, ESG factors are
just as important as
traditional fundamental
factors (e.g., profitability
and valuation) when
evaluating companies
ESG investing can most
likely enhance long-term
returns
Strongly disagree
Disagree
No opinion
Agree
Strongly agree
5%
20%
43%
24%
8%
11%
40%
30%
14%
4%
6%
28%
27%
27%
12%
4%
19%
27%
37%
13%
18%
43%
33%
7%
2%
10%
40%
37%
11%
1%
10%
42%
40%
7%
Rank the following statements on a scale of 1 to 5 (1=strongly disagree, 5=strongly agree) to reflect
your personal views:
Exhibit 9
All Respondents

8. 8
of respondents have no opinion on three statements: ESG investing can most likely enhance long-term
returns; ESG investing is a short-term trend; and ESG investing might work in other countries, but the U.S.
market will never embrace it. The lack of opinion suggests strong opportunities for education in this arena.
Conclusion
While most U.S.-based institutional investors have not yet incorporated ESG factors into decision mak-
ing, steadily increasing rates of usage and changing viewpoints suggest the movement to consider ESG
is gaining traction. Since Callan began conducting this annual survey in 2013, ESG adoption has been
most prevalent in endowments (from 22% in 2013 to 37% in 2015) and foundations (from 31% in 2013 to
39% in 2015). Public funds have materially increased usage over the past two years, moving from 15%
ESG incorporation rate in 2013 to 27% in 2015. While corporate funds’ incorporation rate of ESG factors
appears flat over time at around 15%, divergence between plan types is substantial: just 7% of corporate
defined benefit plans have incorporated ESG into investment decision making while 24% of defined con-
tribution plans have.
ESG issues have received much attention in the last year. Climate change, fossil fuel-free investing, and
the Department of Labor’s Interpretive Bulletin on the appropriateness of economically targeted invest-
ments (which include strategies that incorporate ESG factors) are a few examples of issues that have oc-
cupied investors’ minds and been covered by the press. Should trends in Callan’s ESG survey continue,
we can expect to see more attention to these issues and others related to ESG in the future.

9. 9Knowledge. Experience. Integrity.
Certain information herein has been compiled by Callan and is based on information provided by a variety of sources believed to
be reliable for which Callan has not necessarily verified the accuracy or completeness of or updated. This report is for informational
purposes only and should not be construed as legal or tax advice on any matter. Any investment decision you make on the basis of
this report is your sole responsibility. You should consult with legal and tax advisers before applying any of this information to your
particular situation. Reference in this report to any product, service, or entity should not be construed as a recommendation, approval,
affiliation, or endorsement of such product, service or entity by Callan. Past performance is no guarantee of future results. This report
may consist of statements of opinion, which are made as of the date they are expressed and are not statements of fact. The Callan
Investments Institute (the “Institute”) is, and will be, the sole owner and copyright holder of all material prepared or developed by the
Institute. No party has the right to reproduce, revise, resell, disseminate externally, disseminate to subsidiaries or parents, or post on
internal web sites any part of any material prepared or developed by the Institute, without the Institute’s permission. Institute clients
only have the right to utilize such material internally in their business.
About Callan
Callan was founded as an employee-owned investment consulting firm in 1973. Ever since, we have
empowered institutional clients with creative, customized investment solutions that are uniquely backed
by proprietary research, exclusive data, ongoing education and decision support. Today, Callan advises
on more than $1.8 trillion in total assets, which makes us among the largest independently owned invest-
ment consulting firms in the U.S. We use a client-focused consulting model to serve public and private
pension plan sponsors, endowments, foundations, operating funds, smaller investment consulting firms,
investment managers, and financial intermediaries. For more information, please visit www.callan.com.
About the Callan Investments Institute
The Callan Investments Institute, established in 1980, is a source of continuing education for those in
the institutional investment community. The Institute conducts conferences and workshops and provides
published research, surveys, and newsletters. The Institute strives to present the most timely and relevant
research and education available so our clients and our associates stay abreast of important trends in the
investments industry.
© 2015 Callan Associates Inc.
About the Author
Anna S. West is a Senior Vice President dedicated to Callan’s research and edu-
cation initiatives. As manager of the Published Research Group, she works with
subject matter experts across Callan to produce white papers, surveys, charticles,
and other research for investors. She also oversees the educational content pre-
sented at Callan Investments Institute workshops and conferences. As chair of
Callan’s Environmental, Social, and Corporate Governance (ESG) Committee,
Anna covers ESG trends and developments. Anna is also a member of Callan’s Emerging and Minority,
Women, or Disabled-owned Managers Committee and is chair of the Published Research Committee.
Anna joined Callan in August 2006 and is a shareholder of the firm. Prior to Callan, she worked for Vail
Resorts, Inc. She is a member of Denver University’s Department of Business Information and Analyt-
ics Advisory Board, where she aids in maintaining a curriculum that aligns with current industry needs
and anticipates future trends. Anna earned an MBA from the University of San Francisco and a BA in
International Business and French from Washington University.
For more information about this report, please contact:
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