Sustainable investing, which considers environmental, social and governance factors in portfolio selection and management, now accounts for 30% of professionally managed assets across the globe, according to a recent study by the Global Sustainable Investment Alliance, a multinational membership organization.
GSIA reported that global sustainable investing assets had grown to $21 trillion at the beginning of 2014, a 61% increase over two years.
The U.S., Canada and Europe account for 99% of global sustainable investing assets, with 64% of the total in Europe.
Sustainable investing is not widely practiced in Asia, the study found, but noted growth of interest in investment products that address climate change and resource efficiency.
For purposes of its report, GSIA used an inclusive definition of sustainable investing.
It found that the largest sustainable investment strategy globally was negative screening or exclusion of unsustainable investments, representing more than $14 trillion. Negative screening is the most-deployed strategy in Europe.
ESG integration, the systematic and explicit inclusion of ESG factors into traditional financial analysis, accounting for $7 trillion, is the next most used strategy in the world, and now dominates in the U.S., as well as Australia/New Zealand and Asia, in asset-weighted terms.
Corporate engagement and shareholder action are Canada’s main strategy.
The study found that impact investing — targeted investments, typically in private markets, aimed at solving social or environmental problems — is a small but vibrant segment of the broader sustainable investing universe in all the markets studied.
Two subsets of this strategy are community investing, whereby capital is specifically directed to traditionally underserved individuals or communities, and finance provided to businesses with an explicit social or environmental purpose.
GSIA reported that all sustainable investment strategies continued to grow in Europe, in aggregate, faster than the broad continental asset management market. Impact investing led the way, having increased by 146% over two years.
In the U.S., sustainable investing took a huge leap, growing by 76% between the beginning of 2012 and the beginning of 2014.
Canada’s sustainable investment market is also enjoying growth, a robust 60% over the two-year period, with asset now amounting to $945 billion.
In Australia/New Zealand, managed sustainable investing assets have reached $180 billion, and in Asia $53 billion, with the largest markets being Malaysia, Hong Kong and South Korea.
GSIA said interest in sustainable investing was growing in Japan, evidenced by the fact that 192 financial institutions had signed the Principles for Financial Action for the 21st Century that would alter the flow of capital to activities that correspond to sustainability goals.
As well, it said, green real estate and impact investing bonds are becoming popular in Japan.
And in many markets across the globe, according to the report, public policy and regulatory changes currently underway could increase the level of corporate disclosure on various ESG factors and support shareholder engagement.