Since 1995, the U.S. SIF: Forum for Sustainable and Responsible Investment has produced a biennial survey of the SRI (Sustainable, Responsible, Impact) asset management industry.

Its most recent report, “Report on U.S. Sustainable, Responsible and Impact Investing Trends, 2018,”¹ the assets under management that now consider ESG factors have grown to $12 trillion, an increase of 38 percent since 2016.  When the survey was initiated, Sustainable Responsible Investing assets totaled just $639 billion.

ESG is Now Mainstream

The recent growth in SRI assets reflects a broad acceptance by institutions, professional money managers and retail investors, signaling how far it has come from its early days as a niche investment preference.

Consider the survey’s latest findings:

• Over $3 trillion in assets professionally managed for retail investors now incorporate ESG principles.
• $8.6 trillion in SRI assets are managed on behalf of institutional investors, the largest of which are public funds and insurance companies.
• While the largest share of assets use ESG screens, the swiftest growth in assets over the two years ended 2018 was the product-specific category, which more than doubled in assets from $2 trillion to nearly $4.5 trillion (tobacco-related restrictions witnessed the greatest growth of any ESG criteria).
• The top three individual ESG criteria used by money managers were Climate Change/Carbon ($3 trillion), Tobacco ($2.89 trillion) and Conflict Risk ($2.26 trillion).
• The top three individual ESG criteria used by institutional investors were Conflict Risk ($2.97 trillion), Tobacco ($2.56 trillion) and Climate Change/Carbon ($2.24 trillion).
• Interestingly, Board Issues and Executive Pay were the fourth and fifth top criteria for institutional investors, while Human Rights/Transparency and Anti-Corruption were fourth and fifth for money managers.

Of course, Sustainable Responsible Investing is not just about assessing whether a company is pursuing responsible and sustainable practices, but also involves shareholder advocacy.

On that score:

• Shareholders who filed the most proposals on ESG issues were faith-based funds and money managers.
• While only a small share (8.2 percent) of public funds filed ESG-related proposals, public funds accounted for 70.8 percent of the proposals filed when calculated by assets.
• The most popular proposal was related to proxy access, i.e., the ability of shareholders to nominate directors to corporate boards.
• The second most popular proposal was the disclosure and management of political spending and lobbying.
• Proposals to address stranded carbon assets and efforts to curb greenhouse emissions were a close third.

Advisors interested in learning more are encouraged to read the full report.

For more articles on ESG, click here.

Source:

1. https://www.ussif.org/files/Trends/Trends%202018%20executive%20summary%20FINAL.pdf
2. See referenced disclosure (2) and (3) at https://blog-dev.americanportfolios.com/disclosures/