Systemic Risk and Climate Fears Drive ESG Momentum

Investment volume tied to themes of sustainability and social/environmental responsibility has grown 33% in the last few years alone.

By John Manganaro | November 14, 2016
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Asset managers seeking new levels of diversification and risk awareness are wholeheartedly embracing investing programs designed with environmental, social and governance (ESG) themes in mind, according to a new report from U.S. SIF, the research and advocacy organization supporting ESG and sustainable and responsible investing (SRI).

According to U.S. SIF researchers, ESG/SRI investing assets have expanded to $8.72 trillion in the United States, up an impressive 33% from $6.57 trillion in 2014. Important to note, much of the interest and growth is driven by asset managers themselves, rather than their institutional and retail clients. Investment firms, looking to better map risk exposure and reduce asset correlations, now consider ESG criteria across $8.10 trillion in assets, up a whopping 69% from $4.8 trillion in 2014.

Some investors, for example, are thinking deeply about how the social interconnectivity of the world has dramatically impacted market correlations and the competitive landscape in which all for-profit enterprises operate. Other investors, it could be said, are actually hedging the possibility of negative environmental impacts from climate change within their portfolios, positioning themselves to be ready to take advantage of new solutions that will undoubtedly be needed in a climate-stressed future. At a high level, the top two issues considered both by money managers and by their institutional investor clients are “conflict risk” and “climate change,” the researchers observe.

“The trend of robust growth in sustainable and impact investing is continuing as investment managers apply ESG criteria across broader portions of their portfolios, often in response to client demand,” adds Lisa Woll, U.S. SIF Foundation CEO. “Asset managers, institutional investors, advisers and individuals are moving toward sustainable and impact investing to advance critical social, environmental and governance issues in addition to seeking long-term financial returns.”

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