US SIF Foundation 2016 Report Shows ESG on the Rise with Money Managers, Institutional Investors

Over the past two years, the demand for sustainable and impact investing has risen by 33%, according to US SIF Foundation’s 2016 biennial “Report on U.S. Sustainable, Responsible, and Impact Investing Trends.”

Highlights

  • Assets invested across environmental, social, and governance (ESG) strategies in the United States rose to $8.72 trillion in 2016, an increase of 33% since 2014. This equates to one-fifth of all investments under professional management.
  • Climate change and carbon emissions and conflict risk (particularly in countries known for repressive regimes or terrorism) are the top areas of concern for asset managers and institutional investors.
  • Key reasons cited by money managers for incorporating ESG factors include client demand (85%), mission (83%), risk (81%), returns (80%), social benefit (79%) and fiduciary duty (64%).
  • An early, active member of US SIF, Calvert is a sponsor of the US SIF Foundation’s Trends Report and has participated on the US SIF Board and in numerous committees.

The US SIF Foundation released the 2016 edition of its biennial “Report on U.S. Sustainable, Responsible, and Impact Investing Trends” in November.  The biennial Trends Report surveys the assets under management, investing trends, and ESG criteria of U.S. asset managers and institutional investors using one or more sustainable investment strategies. Institutional investors include public funds, corporations, foundations, faith-based investors, labor union pension funds, and nonprofits, among others.  

In 1995, the first US SIF Trends Report cited ESG assets of $639 billion. Tracking the rise of public and institutional demand for sustainable strategies and greater corporate accountability, ESG assets grew to $6.57 trillion in 2014 and reached $8.72 trillion at the start 2016, according to the US SIF report.

“Asset managers, institutional investors, advisors and individuals are moving toward sustainable and impact investing to advance critical ESG issues in addition to seeking long-term financial returns, said Lisa Woll, US SIF Foundation CEO.  A diverse group of investors is seeking to achieve positive impacts through such strategies as shareowner engagement or investing with an emphasis on addressing climate change, corporate governance, and human rights, including the advancement of women.”

Several new issues were tracked separately in the 2016 report, including transparency and anti-corruption, as well as the emerging trend of gender-lens investing, which saw the greatest interest on the part of institutional investors, with $397 billion in assets. Community investing jumped 89% in 2016 to $122 billion, led by an increase in community development credit union assets.

ESG Trends for Money Managers

The US SIF Foundation identified 300 money managers and 1,043 community investing institutions that incorporate ESG criteria in their investment decision-making. The ESG assets for these groups totaled $8.1 trillion in 2016, up from $4.8 trillion in 2014.

  • Of environmental factors, climate change criteria were a key consideration, applying to $1.42 trillion in AUM, a more than fivefold increase since 2014.
  • Social criteria, which include conflict risk, labor and human rights, diversity, and equal employment opportunity, apply across $7.78 trillion in AUM.

ESG Trends for Institutional Investors

The role of institutional investors in the sustainable and responsible investing universe is on the rise, with a reported $4.72 trillion of ESG assets in 2016, an increase of 17% from 2014.

  • Avoiding investment in countries exhibiting conflict risk, primarily Sudan and Iran, continues to be a leading concern for institutional investors.
  • Climate change and carbon emissions now rank as the second most important ESG issue for the group, affecting $2.15 trillion in assets, nearly quadrupling since 2014.

Advocacy on the Rise

Over the last decade, the rise in shareholder support for an array of resolutions targeting ESG issues highlights the importance that active asset owners place on the role and influence of corporations on societal well-being.

  • Corporate political spending and lobbying was the greatest single ESG concern raised by shareholders over the two-year period, according to the Trends Report, with 377 proposals filed. The target of many of these proposals was companies that deny climate change science and lobby against the regulation of greenhouse gas emissions.
  • Other key shareholder issues were proxy access and the ability for shareholders to nominate directors to corporate boards.

Calvert has worked alongside US SIF (formerly known as the Social Investment Forum) for decades, with representatives on the US SIF board of directors and membership on numerous working groups and committees, including the research and conference agenda committees. Calvert partners with US SIF and other institutional investors and NGOs to advance common objectives, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act, co-file shareholder resolutions on environmental, corporate governance and other ESG issues, and engage in company-specific or industry-wide multi-stakeholder initiatives. Calvert is a sponsor of many US SIF publications and conferences that advance thought leadership on pressing ESG issues and examine leading sustainability trends and practices among money managers and institutional and individual investors.

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The US SIF Foundation is a 501c3 organization that undertakes educational, research and programmatic activities to advance the mission of US SIF.  The Foundation houses the Center for Sustainable Investment Education, which serves the growing need of investment professionals in the United States to gain expertise in the field of sustainable, responsible and impact investment.  The Center provides education, trainings, research and thought leadership on sustainable investment to investors, investment advisors, consultants, and analysts.

US SIF: The Forum for Sustainable and Responsible Investment is the leading voice advancing sustainable, responsible, and impact investing across all asset classes.  Its mission is to rapidly shift investment practices towards sustainability, focusing on long-term investment and the generation of positive social and environmental impacts. US SIF members include investment management and advisory firms, mutual fund companies, research firms, financial planners and advisors, broker-dealers, community investing organizations, nonprofit associations, and pension funds, foundations and other asset owners. Learn more at www.ussif.org.

All views and opinions expressed are being presented for informational and educational purposes only, represent the views and opinions of the authors(s) as of the date of the presentation and are subject to change without notice. The views and opinions expressed are not intended to forecast future events or guarantee future results and do not constitute a recommendation or a solicitation to buy or sell any security. This information does not take into account the specific investment objective, financial situation, or specific needs of any individual, does not provide information reasonably sufficient upon which to base an investment decision and should not be relied upon as investment advice. This information has been obtained from sources believed to be reliable, but Calvert makes no representation as to its accuracy or completeness.