Sustainable, Responsible, and Impact (SRI)* investing is here to stay, and is only getting stronger with time. The U.S. SIF Foundation, has been tracking the industry for the past 10 years and recently published their biennial Trends Report highlighting the significant growth and advancement of the industry. According to the study, the total US-domiciled assets under management using SRI strategies increased 76 percent in the past two years, expanding from $3.74 trillion at the start of 2012 to $6.57 trillion at the start of 2014, representing nearly 18 percent of the $36.8 trillion in total assets under management.
Furthermore, in the past two years, assets incorporating ESG factors have increased threefold to $4.80 trillion. What is pushing this growth?
The report highlights various incentives that have shaped the evolution and growth of SRI in the US including: the “growing market penetration of SRI products, development of new SRI products, and a fuller integration of ESG criteria by numerous large asset managers across wider portions of their holdings.” Investors are being further persuaded by client demand for SRI products, advocates surrounding the divestment movement, and the increasing influence of organizations promoting SRI investing.
This change is highly demand focused. Drivers for this investment trend are increasingly incorporating ESG criteria into their investment analysis and portfolio. Of the money managers working with ESG, 80 percent of them attribute client demand as their primary motivation: they are simply following the money.
Meanwhile, climate change continues to be the most significant environmental factor motivating this movement. The call for divestment has gained significant momentum as environmental advocates, especially within college and university campuses across the country where students have been pressuring their universities to divest from fossil fuels.
According to the report, since the start of 2014, divestment policies accounted for “$29.3 billion in money manger assets and $13.5 billion in institutional investor assets.”
Finally, organizations promoting SRI are broadening their influence. The United Nations-supported Principles for Responsible Investing (PRI) Initiative, for example, has published their first annual Responsible Investment Transparency Report this summer, which provides new data about investors engaging in ESG integration across many asset classes. SRI is becoming increasingly popular as major firms, such as Bank of America, are joining the ranks of PRI Signatories, a voluntary list that develops standards for integrating ESG issues into investment analysis.
We are seeing a growing commitment on the part of money managers to pursue SRI and incorporate ESG strategies into their investment analysis and portfolio decisions. The influence of SRI is only predicted to grow, as more firms are encouraged to pursue these strategies.
* not to be confused with "socially responsible investing" -- many organizations in this field have retained the SRI acronym, but now use it to represent the terms "sustainable, responsible and impact" investing, in large part because many people have come to equate 'socially responsible investing' with just negative screens.