"Sustainable" investment comes in various flavors, but collectively speaking it is growing its share of the overall universe of assets, new figures show.
Investments which track “sustainable” ideas – such as those designed to cut carbon emissions – accounted for more than a third of all assets being overseen in major economies around the world, pointing to the rapid growth of this approach to managing money, figures show.
At the start of 2020, global sustainable investment reached $35.3 trillion in five major markets, a 15 per cent increase in the past two years (2018 to 2020), according to the Global Sustainable Investment Alliance. Sustainable investment assets under management make up a total of 35.9 per cent of total assets under management, up from 33.4 per cent in 2018.
GSIA is a group advocating for sustainable investments through a series of regional affiliates. This report provides a snapshot of sustainable investing across Europe, the United States, Japan, Canada, Australia and New Zealand (Australasia) based on the regional and national reports from GSIA members or in the case of Europe, from secondary industry data.
Among the main takeaways from the 31-page report, it said sustainable investment assets are continuing to grow in most regions, with Canada experiencing the largest increase in absolute terms over the past two years (48 per cent growth), followed by the US (42 per cent growth), Japan (34 per cent growth) and Australasia (25 per cent growth) from 2018 to 2020. Europe reported a 13 per cent decline in the growth of sustainable investment assets in 2018 to 2020 due to a changed measurement methodology from which European data is drawn for this year’s report.
“This report shows that beyond the top line growth in sustainable investment assets, this is an industry that is in transition, with rapid developments across regions that are reshaping sustainable investment to increasingly focus on moving the industry toward best standards of practice. Increasingly, there are expectations that sustainable investment is defined not just by the strategies involved, but by the short- and long-term impacts that investors are having from their sustainable investment approach,” the report said.
The annual report said Canada is now the market with the highest proportion of sustainable investment assets at 62 per cent, followed by Europe (42 per cent), Australasia (38 per cent), the US (33 per cent) and Japan (24 per cent).
The US and Europe continued to represent more than 80 per cent of global sustainable investing assets from 2018 to 2020.
The report breaks down different types of “sustainable” investing, such as where an investor screens out firms deemed unacceptable for various reasons (because it mines coal, for example), or which tries to use financial muscle to encourage boardroom change or seeks out best-in-class behaviors.
Globally, the largest financial sum devoted to a form of sustainable investing was $19.771 trillion, in “negative/exclusionary screening.” The smallest sum was in “impact/community investing,” at $444 billion.