Environmental, social and governance issues, already prominent among European investors, are no longer held in niche status with U.S. investors.
In the past 18 months, U.S. investors have been putting much greater emphasis on ESG factors when creating their portfolios, and some of the biggest money managers — including BNY Mellon Investment Management, BlackRock Inc., Goldman Sachs Asset Management and J.P. Morgan Chase & Co. — are responding.
“The U.S. market has really come to grips with the importance of ESG. It's taken a long, long time,” said Sandra Carlisle, head of responsible investment at Newton Group, a London-based global asset management affiliate of BNY Mellon Investment Management.
But now that U.S. investors have shifted their attentions toward ESG issues, “the shift has been very fast,” she added.
Newton, a specialist in ESG investing since it was founded in 1978, is looking to move into more sustainable global equity positive-impact strategies.
BlackRock, the New York-based money management giant that last year launched BlackRock Impact, a sustainable investing division, also launched an exchange-traded fund that tracks the MSCI ACWI Sustainable Impact index to coincide with Earth Day in April. And J.P. Morgan's investment bank launched ESG platform Ethos in February.
Not to be outdone, Goldman Sachs acquired ESG money manager Imprint Capital Advisors in July and also worked with New York state to create a low emission index for one of the state's retirement funds.
ESG investing among institutional asset owners jumped 61% between 2012 and 2014, according to US SIF: The Forum for Sustainable and Responsible Investment, Washington. By early 2014, US SIF found, institutional assets in ESG strategies in the U.S. reached $4.04 trillion.
Janine Guillot, director of capital markets policy and outreach at the Sustainability Accounting Standards Board in San Francisco, noted “two related trends” within ESG “that have exploded in the last few years.”
The first has been a growing interest among a group of investors wanting to allocate assets to some specific goal, which has led to managers launching strategies to accommodate them. The second trend is integration of ESG factors into investment decision-making across all asset classes by large institutional money managers.
Ms. Guillot said added that “climate change and climate risk are also big drivers” of these growing trends.
On Earth Day — April 22 — BlackRock expanded its suite of socially responsible ETFs with the launch of the iShares Sustainable MSCI Global Impact ETF, otherwise known as MPCT. MPCT seeks to track the investment results of the new MSCI ACWI Sustainable Impact index.
Daniel Gamba, a managing director at BlackRock in New York and head of BlackRock's iShares Americas institutional business, said the index is composed of companies that derive a majority of their revenue from products and services that address at least one of the world's major social and environmental challenges, as identified by the United Nations' 17 sustainable development goals.
Themes targeted in the index include energy efficiency, sustainable water, sanitation, nutrition and education.