Updated with correction
U.S. socially responsible investing assets grew to $3.07 trillion as of year-end 2009, up 13.3% from $2.71 trillion as of year-end 2006, according to the Social Investment Forum Foundation's latest report on SRI trends.
SRI assets grew at a faster rate than the broader universe of total assets under professional management, which was up less than a percentage point during the same period, according to the “2010 Report on Socially Responsible Investing Trends in the United States” and the SIF Foundation's 2007 trends report.
As a result of the growth, 12.2% of the $25.2 trillion in the broader universe of total assets under professional management of U.S.-based and foreign managers offering investment portfolios for U.S. investors tracked by Thomson Reuters Nelson's Directory of Investment Managers was involved in a socially responsible investing strategy as of year-end 2009, the report said. That percentage is up from 2006, when the SRI share of the then-$25.1 trillion in total assets under professional management was 10.8%.
Public pension funds and other publicly pooled funds managed for federal, state, county and municipal governments incorporate environmental, social and governance criteria across $1.46 trillion in assets and account for more than 70% of all institutional ESG assets and 58% of the $2.5 trillion in assets that incorporate ESG criteria into investment analysis and portfolio construction, the 106-page report said.
At year-end 2006, public pension funds and other publicly pooled portfolios had $1.16 trillion in socially screened assets, according to the 2007 trends report.
For the latest report, 52% of institutions that responded to a survey on why they incorporated ESG factors into their investments cited regulation or legislation more than any other reason.
The research identified $37.8 billion in total assets from 177 hedge funds, social venture capital and private equity funds, and responsible property funds that incorporated ESG criteria. That number is up 285% since 2007, the report said.
In referring to socially responsible investments, the report identified assets using at least one of three SRI strategies: incorporation of ESG factors into investment analysis and portfolio construction; filing shareholder proposals on ESG issues; and deposits or investments in banks, credit unions, venture capital funds and debt funds that have a specific community investing mission.
The pool of SRI assets has grown more rapidly than the overall investment universe due to, among other reasons, the development of new SRI products and the adoption of SRI strategies by managers and institutions not previously involved in the field, the report said.
Among institutions, the report identified 250 mutual funds, including those underlying annuity products, with a total of $316.1 billion in assets invested under ESG criteria. The most prevalent ESG factors incorporated into mutual fund management, in asset-weighted terms, are Sudan, tobacco, alcohol, gambling, defense/weapons and the environment. Sudan was the top criterion in asset-weighted terms with 47% of ESG mutual funds representing $215 billion in total net assets subject to Sudan-related investment policies — including $198 billion in TIAA-CREF's mutual fund and annuity assets from its Sudan divestment, the report said.
In numerical terms, “tobacco remains the most frequently applied ESG criterion, affecting 64% of ESG mutual funds, with $121 billion in assets. Alcohol criteria affect the management of half of ESG mutual funds, with $116 billion in assets,” the report said.
