Global sustainable investment strategy assets up 25% in 2-year period — report

The amount of assets in sustainable investment strategies continues to grow globally, albeit at a slower pace than previous years, said the Global Sustainable Investment Alliance’s most recent biennial report released Monday.

Assets invested in sustainable strategies rose to $22.89 trillion globally at the beginning of 2016, up 25% from the start of 2014, and accounting for 26% of all professionally managed assets globally. By comparison, sustainable assets grew 61% globally between 2012 and 2014,

Broken out by region, Europe had $12.04 trillion in sustainable AUM at the start of 2016, up 12% from 2014; the U.S., $8.72 trillion, up 33%; Canada, $1.09 trillion, up 49%; and Asia (excluding Japan), $52 billion, up 15.7%. Australia/New Zealand and Japan reported the highest growth in sustainable assets at $516 billion and $474 billion, respectively, at the beginning of 2016, up from $148 billion and $7 billion at the start of 2014.

The report, which defines sustainable investing as the incorporation of environmental, social and governance factors into the investment process, attributed the increase in Japan’s sustainable AUM to first-time information on numerous large asset owners and an increase in sustainable investing activity.

The report attributed Canada’s growth in sustainable AUM to money managers’ increasing focus on sustainable investing, an increasing awareness of ESG long-term risks and opportunities, Canadian pension funds’ rising assets and the rise of millennial investors who are more likely to consider ESG factors in their investment decision-making.

In the U.S., $8.1 trillion of the region’s $8.72 trillion in total sustainable assets was held by institutional investors.

The most common sustainable investing strategies globally remain negative/exclusionary screening, with $15.02 trillion in assets, up 25% from 2014; ESG integration into traditional financial analysis, $10.37 trillion, up 38%; and corporate engagement/shareholder actions, $8.37 trillion, up 41%. Strategies may fall under more than one category.

The report also found that fiduciary duty and client demand are the key drivers behind the sustainable investing growth and that growing concern globally over climate change has led to increased interest in green finance and climate-aligned bonds. In Europe and Canada, the growing interest in green bonds has resulted in changes to the regions’ average sustainable asset allocation, which now has a bonds/equities breakout of 64% bonds/33% equities vs. 40%/50% in 2014. Other asset classes make up the remainder of the average allocation.

The Global Sustainable Investment Alliance is made up of the US SIF Forum for Sustainable and Responsible Investment; Responsible Investment Association of Canada; European Sustainable Investment Forum; U.K. Sustainable Investment and Finance Association; Vereniging van Beleggers voor Duurzame Ontwikkeling of the Netherlands; and Responsible Investment Association Australasia.

Bloomberg contributed financial support to the report.