Sustainable Investment Assets Grew by 76% From 2012 to 2014

New report by US SIF finds strategies are applied across asset classes

Assets under management in the U.S. that use sustainable, responsible and impact investing strategies account for more than one out of every six dollars under professional management, according to a new report by the US SIF Foundation.

The report said SRI assets using SRI strategies grew by 76% to $6.6 trillion from the start of 2012 to the start of 2014.

The foundation’s research, conducted between May and August, found that 480 U.S. institutional investors, 308 money managers and 880 community investment institutions that applied environmental, social and governance criteria in their investment analysis and portfolio selection held $6.2 trillion as of Jan. 1.

As well, 202 institutional investors or money managers with $1.7 billion under management filed or co-filed shareholder resolutions on ESG issues at publicly traded companies from 2012 through 2014.

The foundation arrived at its overall total by eliminating double-counting for assets involved in both strategies.

It said assets engaged in SRI investing practices at the start of 2014 represented nearly 18% of the $37 trillion in total assets under management tracked by Cerulli Associates.

“The findings clearly demonstrate that investment decisions using sustainable, responsible and impact investing strategies are on the rise,” Lisa Woll, chief executive of US SIF and the US SIF Foundation, said in a statement.

“Sustainable investment strategies are being applied across asset classes to promote corporate social responsibility, build long-term value for companies and their stakeholders, and foster businesses that will yield community and environmental benefits.”

Since 1995, the SRI universe has generated a 13.1% compound annual growth rate, according to the report.

SIF Trends

The report described several major trends it said were shaping the evolution and growth of SRI within U.S. financial markets.

Money managers, driven by institutional and individual investor demand and by the mission and values of their management firms, are increasingly incorporating ESG factors into their investment analysis and portfolio construction.

Assets managed at the start of 2014 by investment firms considering ESG issues grew from $1.4 trillion at the start of 2012 to $4.8 trillion. 

Likewise, the pool of assets to which institutional owners apply ESG criteria grew to $4 trillion, up 77% since the start of 2012.

Eighty percent of managers that provided information about reasons for incorporating ESG cited client demand as their motivation, and some 70% also said they considered ESG factors in order to fulfill their (or their clients’) mission, to improve returns and to manage risk.

From 2012 to 2014, the number of private equity and other alternative investment funds considering ESG factors grew from 301 with $132 billion in assets to 336 with $224 billion in assets.

According to the report, there was a significant increase in the number of institutional investors and money managers that incorporated investment criteria related to military and weapons production following the Dec. 2012 Sandy Hook Elementary school shooting and increased pressure from elected officials and stakeholders.

Since 2012, money managers’ consideration of these criteria has grown nearly four-fold in asset-weighted terms to affect $588 billion. Among institutional asset owners, concerns over weapons now apply to $355 billion in assets, a nearly five-fold increase.

Sudan remains the leading social issue for institutional investors in terms of the assets affected, with restrictions on investing in companies doing business in that country affecting $2.7 trillion in assets.

Climate change is the chief environmental factor in terms of assets of money managers and institutional investors, affecting $276 billion and $552 billion, respectively. As well, momentum has grown around fossil-free investment, and now affect tens of billions of dollars in assets.

Moreover, shareholders concerned about climate risk filed 72 resolutions in 2014, more than twice the number in 2012, and negotiated commitments from the target companies to disclose and reduce their greenhouse gas emissions.

And individual and institutional investors overwhelmingly support a rulemaking petition that urges the Securities and Exchange Commission to require companies to disclose their political spending.

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