WASHINGTON, DC: A report from the Global Sustainable Investment Association (GSIA) says the value of the world's sustainable investment market - one based on environmental, social and governance (ESG) factors - has risen from US$13.3 trillion to US$21.4 trillion in the past two years.
Between 2012 and the beginning of 2014, the fastest growing regions were the U.S., Canada and Europe - accounting for 99 percent of global sustainable investing (SRI) assets.
The GSIA report notes the growth in global SRI reflects a consensus among investors that accurate valuations and proper risk management require greater disclosure and consideration of ESG issues such as climate change, health and safety, human rights, and consumer protection. Managers are also using ESG criteria to identify opportunities to invest in sustainable businesses that are involved in energy efficiency, green infrastructure and clean fuels.
GSIA says the largest sustainable investment strategy globally is now negative screening/exclusions - e.g. not funding arms manufacturers – and worth US$14.4 trillion, followed by ESG integration (US$12.9 trillion) and corporate engagement/shareholder action (US$7.0 trillion).
Negative screening is the largest strategy in Europe; ESG integration is now the investment focus in the U.S., Asia and Australia/New Zealand; and corporate engagement and shareholder action is the dominant strategy in Canada.
In Europe, sustainable and responsible investment strategies are growing at a faster rate than the general asset management market says the study. From 2012 to 2014 funds committed to sustainability-themed investments grew 30 percent in US$ terms while assets to which exclusionary screens were applied grew 90 percent.
At the beginning of 2014, U.S. SRI assets totaled US$6.57 trillion - up from US$3.74 trillion two years earlier. As a result, nearly 18 percent of all investments under professional management at the start of 2014 were held by individuals, institutions or money managers that consider ESG issues in selecting investments across a range of asset classes.
GSIA says sustainable investment assets in Asia have increased 32 percent since 2012 and now stand at US$53 billion. Prompted by the growing awareness of the capital required to finance a low-carbon economy, the largest Asian markets for SRI currently are Malaysia, Hong Kong and South Korea.