Growth in responsible investment strategies set to encompass climate change

In November 2014, the US SIF Foundation released its 10th biennial report on trends in the sustainable, responsible and impact investing (SRI) industry.

The new report shows significant growth over the past two years in U.S.-domiciled assets managed using some form of SRI strategy. Specifically, assets under management increased from $3.74 trillion at the beginning of 2012 to $6.57 trillion at the beginning of 2014. By the authors’ estimate, as of the beginning of 2014, nearly one in six dollars under professional investment management was managed using an SRI strategy.

The large leap in assets is attributable primarily to the growth in the number of asset managers considering environmental, social or governance (ESG) criteria in their investment management processes, which has increased assets in that category threefold from $1.4 trillion in 2012 to $4.8 trillion at the beginning of 2014.

Figure 1: Growth of U.S.-domiciled assets managed using some form of SRI strategy

Many managers integrating the consideration of ESG factors into their investment analysis are doing so after having become signatories to the United Nations Principles for Responsible Investment (the PRI).

Signing on to the PRI commits an investor to incorporating ESG issues into investment analysis, decision-making processes, and ownership policies and practices, as well as to the promotion of the PRI generally. The growth in signatories since the inception of the PRI in 2006 has been very strong, going from just under 70 signatories representing $2 trillion in assets under management in 2006 to over 1300 signatories representing $45 trillion in assets under management today.

The list of signatories includes many of the world’s largest institutional investors, including asset owners such as CalPERS and Canada Pension Plan Investment Board, as well as global asset managers such as Capital Group, PIMCO and Wellington Asset Management. The strength of this trend has come as something of a surprise to many U.S.-based investors, where the adoption of ESG integration, at large, has lagged other markets globally.

 

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