Sustainable investments surged by more than $2 trillion (Dh7.34 trillion) in the last two years as money managers worked to accommodate US institutions’ demand for assets that meet environmental, social and corporate-governance goals.
The sustainable, responsible and impact-investing category totalled $8.72 trillion at the start of 2016, representing about one-fifth of all managed investments, according to a biennial report published by Washington-based US SIF Foundation, the Forum for Sustainable and Responsible Investment. More than 1,000 investment funds totaling about $2.6 trillion include ESG criteria, the group said.
Clients are asking for new funds that focus on specific issues, including climate change and conflict risk, which avoids companies doing business with countries that support terrorism or have repressive regimes, such as Iran and Sudan, said Meg Voorhes, research director for US SIF.
They’re also steering clear of weapons and firearms, Voorhes said. Policies on military and weapons affected $845 billion in institutional investor assets in 2016, more than double the $355 billion in 2014 and more than tenfold the amount in 2012.
“A lot of this is driven by public funds that have seen mass shootings in their districts,” she said.
Institutional investor assets that seek to screen companies for diversity and equal employment opportunity grew 22 per cent, to $707 billion. The report also tracked gender-lens investing for the first time, reporting that $397 billion in investor assets had an explicit focus on products or companies that actively support women’s social and economic advancement.
A Department of Labour action last year made it easier for private-sector employers to start including socially responsible investment funds in their pension plans. That change “may have paved the way for many more private sector plans to adopt” such strategies, the report said.
There’s room for growth. At the end of 2014, just $2.7 billion of the $8.31 trillion held in private retirement plans was invested in funds that explicitly marketed themselves as socially responsible.
Eaton Vance Corp. last month agreed to buy Calvert Investment Management Inc. to expand in the area, adding $12.3 billion in assets under management. Calvert created the first responsibly managed fixed-income and international equity funds, and programmes in shareholder advocacy, corporate engagement and impact investing.
