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Responsible investment is on the rise becoming a major force shaping capital markets

posted onJuly 21, 2021

Responsible investments have reached US$35.3 trillion in assets under management, a growth of 15% in two years (2018-2020), and in total equating to 36% of all professionally managed assets, a new report released by the Global Sustainable Investment Alliance (GSIA) has found.

The fifth in a series of biennial reports mapping the state of sustainable investment in the major financial markets,  combining regional data from the United States, Canada, Japan, Australasia and Europe, shows that the global investment industry transitions to one more focused on the short- and long- term impacts generated by investors.

Sustainable investment assets are continuing to grow in most regions, with Canada experiencing the largest increase in absolute terms over the past two years (48% growth), followed by the United States (42% growth), Japan (34% growth) and Australasia (25% growth) from 2018 to 2020.

Europe reported a 13% decline in the growth of sustainable investment assets in 2018 to 2020 due to a changed measurement methodology from which European data is drawn for this year’s report. This reflects a period of transition associated with revised definitions of sustainable investment that have become embedded into legislation in the European Union as part of the European Sustainable Finance Action Plan. 

Canada is now the market with the highest proportion of sustainable investment assets at 62%, followed by Europe (42%), Australasia (38%), the United States (33%) and Japan (24%). 

The United States and Europe continue to represent more than 80% of global sustainable investing assets during 2018 to 2020. 

The most common sustainable investment strategy is ESG integration, followed by negative screening, corporate engagement and shareholder action, norms-based screening and sustainability-themed investment 

The 2020 US SIF Foundation Trends Report identified USD4.6 trillion in ESG assets managed for individual retail or high-net-worth clients, up from USD3 trillion in 2018. According to a 2019 Morgan Stanley study, 85% of individual investors surveyed were interested in sustainable investing, up 10% from 2017. 

Among millennials, 95% were interested, up 9% from 2017. The study found that individual investor survey respondents were most interested in the themes of plastic reduction (46%) and climate change (46%), community development (42%), circular economy (39%) and SDGs (36%).

In a 2019 survey by Natixis Global Asset Management of participants in retirement contribution plans, 75% of respondents said it was important to make the world a better place while growing their wealth. Sixty-one percent said including sustainable investment options would make them more likely to contribute to their plan. 

Sustainable investment is an investment approach that considers environmental, social and governance (ESG) factors in portfolio selection and management. 

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