- Sustainable, responsible and impact (SRI) investing assets have expanded to $8.72 trillion in the United States, up 33% from $6.57 trillion in 2014
- Much of this growth is driven by asset managers, who now consider environmental, social or corporate governance (ESG) criteria across $8.10 trillion in assets, up 69 percent from $4.8 trillion in 2014
- The top two issues considered both by these money managers and by their institutional investor clients is conflict risk and climate change
- From 2014 through the first half of 2016, 176 institutional investors and 49 investment managers controlling $2.56 trillion in assets filed or co-filed shareholder resolutions on ESG issues
Sustainable, responsible and impact investing assets now account for $8.72 trillion,or one in five dollars invested under professional management in the United States according to the US SIF Foundation's biennial Report on US Sustainable, Responsible and Impact Investing Trends 2016 which was released last week.
The biennial Trends Report—first conducted in 1995 examines a broad range of significant ESG issues such as climate change, human rights, weapons avoidance, and corporate governance.
“The trend of robust growth in sustainable and impact investing is continuing as investment managers apply ESG criteria across broader portions of their portfolios, often in response to client demand,” said Lisa Woll, US SIF Foundation CEO. “Asset managers, institutional investors, advisors and individuals are moving toward sustainable and impact investing to advance critical social, environmental and governance issues in addition to seeking long-term financial returns.
“A diverse group of investors is seeking to achieve positive impacts through such strategies as shareowner engagement or investing with an emphasis on addressing climate change, corporate governance, and human rights including the advancement of women.”
The significant growth in ESG assets reflects demand from individual and institutional clients, growing market penetration of SRI products, the development of new products that incorporate ESG criteria and the incorporation of ESG criteria by numerous large asset managers across wider portions of their holdings.
The research found the top reasons managers report incorporating ESG factors include client demand (85%), mission (83%), risk (81%), returns (80%), social benefit (79%) and fiduciary duty (64%).
The number of investment vehicles and financial institutions incorporating ESG criteria continues to grow and includes mutual funds, variable annuities, ETFs, closed-end funds, hedge funds, VC/private equity, property/REIT, other pooled investment vehicles, and community investing institutions.
The leading ESG criteria that institutional investors consider are restrictions on investing in companies doing business in regions with conflict risk (particularly in countries with repressive regimes or sponsoring terrorism) and consideration of climate change and carbon emissions.