Impact Blog

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      By Anthony Eames, Director of Responsible Investment Strategy, Calvert Research and Management

      Washington - Across the globe, interest in environmental, social, and governance (ESG) strategies is rapidly gaining ground with individuals and institutions. Whether it's hurricanes, gun violence or product-safety headlines catching people's attention, the trends indicate more investors are attracted to responsible investment strategies as a way to make a difference. It's an important trend that financial advisors cannot afford to ignore.

      Popularity has spawned growth. In the United States, from 2014 to 2016, assets invested in ESG strategies climbed 33% to $8.72 trillion, according to U.S. SIF Foundation's 2016 biennial "Report on U.S. Sustainable, Responsible, and Impact Investing Trends." That means that one of every five dollars under professional management is in ESG. Investment managers broadly appear to be responding to ESG demand, especially from institutional investors and certain segments of the retail market.1

      Calvert Blog 10-26

      According to the U.S.SIF report, the areas of most interest to investors include clean energy, weapons production, human rights, and corporate political spending and lobbying. For asset managers and institutional investors, climate change, carbon emissions and conflict risk (particularly in countries known for repressive regimes or terrorism) are top areas of concern.

      Key reasons money managers cited for incorporating ESG factors:

      • client demand (85%)
      • mission or values (83%)
      • risk reduction and management (81%)
      • financial performance (80%)
      • social benefit (79%), and
      • fiduciary duty (64%)

      In 2016, ESG assets for institutional investors were reported to be $4.72 trillion, a 17% increase since 2014, according to the report. Avoiding investment in countries exhibiting conflict risk, primarily Sudan and Iran, continued to be a leading concern for institutional investors. Climate change and carbon emissions ranked as the second most important ESG issue for the group, affecting $2.15 trillion in assets, nearly quadrupling since 2014.

      "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, said in a press release announcing the 2016 report.2 "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."

      Bottom Line: Responsible investing is rapidly gaining ground with institutions and investors. Now may be an opportune time for investors to evaluate the ESG issues most important to them -- and their investment options.