Sustainable Investing: 30% of Global Managed Assets

Stephen Mallery |

By James Griffitts, Contributor at First Affirmative Financial Network

A study conducted by the Global Sustainable Investment Alliance (GISA) has found that sustainable investing now accounts for 30% of professionally managed assets globally. Sustainable investing, which factors environmental and social criteria into portfolio selection, has grown by 61% globally over two years, reaching $21 trillion at the beginning of 2014.

GISA defined sustainable investing to include several methods for investing. The most widely practiced strategy globally was negative screening, meaning the exclusion of investments found to be unsustainable. Negative screening is used most commonly in Europe and accounts for $14 trillion of the global total.

The most frequently used method for sustainable investment in the United States is called ESG integration. It’s an analysis process that integrates environmental, social, and corporate governance factors (traditionally considered to be “non-financial” factors) into investment decision-making. ESG factors are key performance indicators used to judge a company’s environmental and social impact and transparency. This method is popular in Asia and the Pacific as well as the United States and accounts for almost $7 trillion in assets.

According to GISA, sustainable investing is most prevalent in the United States, Canada, and Europe, which account for 99% of sustainable investing assets. Despite a growing sustainable market in Asia, sustainable investing is not yet widespread in the region. The GISA study noted, however, that in Asia there has been a rise in investor interest in products that address resource efficiency and climate change.

GISA found that sustainable investing is growing globally. In the United States, sustainable investing grew by 76% between 2012 and 2014. Over the same two-year period, Canada witnessed 60% growth, nearing $1 trillion in sustainable assets. Europe continues to lead the way in impact investing with astounding 146% growth between 2012 and 2014 and accounts for 64% of global sustainable assets.

Sustainable investing is also gaining popularity in Australia and New Zealand, now topping $180 billion. Interest is also rising across Asia. In Japan, green real estate and impact investing bonds are growing in popularity. The International Finance Corporation, part of the World Bank Group, predicts growth in sustainable asset investment in Africa over the next five years, and sustainable investing is also growing in Latin America.

GISA’s report highlights the increasing global push for better environmental and social practices by investors. Sustainable investing continues to show impressive growth numbers worldwide and is poised to expand beyond the developed world and push companies and governments towards sustainable socially responsible practices.

Republished with permission from First Affirmative Financial Network, a manager of investment portfolios that align personal values and/or institutional mission with an investment strategy tailored to the needs and goals of the investor. For more information about First Affirmative and its portfolio management strategies, or to discuss whether and how you might begin to align your investment portfolio with your own values, contact Mallery Financial.