Green wave drives ESG assets over $17 trillion

If there was any doubt about the momentum behind the sustainable investing movement it might have been put to rest by the findings from the latest Report on U.S. Sustainable and Investing Trends.

The biannual report from The Forum for Sustainable and Responsible Investment, shows that assets managed following sustainable guidelines now represent a third of all professionally managed U.S. investments.

The $17.1 trillion in sustainable assets represents a 42% increase from 2018 when total sustainable assets were at $12 trillion.

The latest market sizing represents a 25-fold increase from where the assets were in 1995, and a 14% compound annual growth rate over the past 25 years.

The report separates the assets to show that more than $12 trillion is managed to incorporate environmental, social and governance factors for institutional investors, and $4.6 trillion is managed for retail investors.

More than $2 trillion of the total is attributable to shareholder resolutions, with some of the managed assets incorporating ESG strategies and also counted as employing shareholder resolutions.

“Our data is showing that ESG integration is just not a phenomenon anymore,” said Lisa Woll, chief executive of the US SIF Foundation.

The report identified U.S.-domiciled assets held by 530 institutional investors, 384 money managers and 1,204 community investment institutions that practice ESG incorporation.

The largest percentage of money managers cited managing risk as their top motivation for pursuing ESG incorporation, and money managers reported that ESG integration was the most prevalent ESG incorporation strategy. The largest number of institutional investors cited fulfilling mission and pursuing social or environmental impact as their top motivations.

“Money managers and institutional investors are using ESG criteria and shareholder engagement to address a plethora of issues including climate change, sustainable natural resources and agriculture, labor, diversity and political spending,” Woll said.

Top specific ESG criteria ranked by institutional investor assets invested showed $2.73 trillion focused on conflict risk, including terrorism, $2.61 trillion focused on climate change, $2.47 trillion allocated to tobacco risks, $2.28 trillion allocated to corporate board issues and $2.18 trillion invested with a focus on sustainable natural resources.

“The incorporation of ESG is not a monolithic standardized endeavor,” said Joshua Humphreys, director at Coatan Institute, who co-authored the report along with Meg Voorhes, project director at US SIF.

“There are so many different ways in which ESG considerations can be factored in,” he added. “It’s all about risk opportunity, and it’s also about changing the world.”