Sustainable investing assets now represent one-third of the $51.4 trillion professionally managed assets in the U.S., according to the US SIF Foundation's biennial trends report.
The Report on U.S. Sustainable and Impact Investing Trends, released Nov. 16, covers U.S. money managers and institutional asset owners using sustainable investment strategies, and looks at the ESG factors used to manage portfolios. US SIF considers incorporation of environmental, social and governance criteria in investment analysis and portfolio selection, and filing shareholder resolutions on those issues as the two main strategies for sustainable investing.
Of the $17.1 trillion in sustainable investing assets at the start of 2020, $2 trillion was involved in filing or co-filing shareholder resolutions on ESG issues at publicly traded companies from the start of 2018 to the end of 2019.
The 2020 levels represent a 42% growth spurt in the past two years. Money managers told US SIF that client demand was the top motivation, while most institutional investors said they were motivated by mission and social benefit.
Environmental concern was the fastest-growing category over the past two years, up 57% over the previous two-year period.
Among specific issues, executive pay had the greatest growth, up 122% since 2018. By assets, the largest amount, $2.73 trillion, involved conflict risk from terrorist or repressive regimes.
The report includes 530 institutional asset owners with $6.2 trillion in ESG assets, representing roughly half of the $12 trillion that money managers identified as institutional assets. Public funds represented the largest share, with 53% or $3.4 trillion, followed by insurance companies at 38%, and single- digit percentages for educational investors, foundations and others.
The $3.4 trillion share for public funds was a 10% increase over the previous two years. For those public investors, restricting investments in companies doing business with conflict-risk countries remains the top ESG factor affecting $2.49 trillion in assets. The other top issues were labor issues, up 40% since 2018; board issues, up 12%; tobacco, up 29%; and climate change/carbon, up 38%.
Climate change and carbon emissions were the top environmental concern, affecting $2.6 trillion in ESG assets. Other topics gaining importance were sustainable natural resources and agriculture, labor and social issues, and corporate governance criteria such as board issues, anti-corruption and executive pay.
For asset managers, climate change was still the most important ESG issue, with $4.2 trillion in assets involved, a 39% increase from the 2018 report.