Global ESG assets reach $13.6 trillion — report

At least $13.6 trillion of assets under management incorporate environmental, social and governance concerns into their investment selection and management, according to a report issued Monday by the Global Sustainable Investment Alliance.

The amount represents 21.8% of the total assets under management in the regions covered by the report — the U.S., Canada, Europe, Japan, Australia, Africa and Asia outside of Japan — the report said. Sustainable investment information was not available from Latin America.

The report, “Global Sustainable Investment Review 2012,” covers all major asset classes, including public equities, fixed income, as well as assets managed by hedge funds and in microfinance investment. The report defined sustainable investing as “an investment approach making reference to” ESG factors in the selection and management of investments. The investment strategies in the report include positive and negative investment selection, ESG integration and shareowner engagement.

Europe accounts for the biggest share of sustainable assets under management with $8.758 trillion, accounting for 64.5% of the market. The U.S. ranked second with $3.74 trillion, or a 27.6% share; Canada, $589 billion, or 4.3%; Africa, $229 billion, or 1.7%; Australia and New Zealand, $178 billion, or 1.3%; Asia ex-Japan, $64 billion, or 0.5%; and Japan, $10 billion, or 0.1%.

Sustainable investments account for 49% of total assets under management in Europe, 35.2% in Africa; 20.2% Canada; 18% Australia and New Zealand; 11.2% U.S.; 2.9% Asia ex-Japan; and 0.2% Japan.

Negative or exclusionary screening is the most common sustainable investing strategy, accounting for $8.3 trillion in assets; followed by ESG integration, with $6.2 trillion; and corporate engagement or shareholder action, with $4.7 trillion. Norms-based screening, an approach used on a large scale only in Europe, which screens investments against minimum standards of business practice based on international norms, accounted for $3 trillion.

The report estimates the $13.6 trillion comprises 89% institutional assets and 11% retail assets.

Investment managers “could be using more than one strategy,” said Meg Voorhes, deputy director and director of research at US SIF, an association of firms, institutions, professionals and others engaged in sustainable and responsible investing in the U.S. that participated in the report. “So if you count the strategies separately they add up to more than” the total global sustainable assets.

The report “shows particularly in Europe and Canada and the United States (sustainability investing) is a growing part of investment management, and looking at ESG (factors) is becoming a mainstream (investment practice) and something all investors need to incorporate into their investment management process,” Lisa Woll, CEO, US SIF, said in an interview.

The report, available at http://gsiareview2012.gsi-alliance.org/#/1, is the first to produce a global review by combining the results of the market studies of sustainable investment forums of the seven regions.