Global sustainable investment under management have reached 36% of professionally managed assets, according to a new report from the Global Sustainable Investment Alliance (GSIA), with growth over the past few years led by Canada and the US.
In its biennial Global Sustainable Investment Review (GSIR), the GSIA found that sustainable investment AUM grew 15% to $35.3 trillion, from $30.7 trillion in 2018, with the reported rates muted by a change in measurement methodology for data from Europe. By market, sustainable investments in Canada grew by 48%, followed by 42% growth in the US, 34% in Japan and 25% in Australasia. Driven by methodology changes following revised definitions under the EU’s Sustainable Finance Action Plan, European sustainable investments in the report showed a 13% decline in the 2018-2020 period.
The GSIA is a collaboration of sustainable investment organizations, with a mission “to deepen the impact and visibility of sustainable investment organizations at the global level.” For its new report, the organization uses a broad definition of “sustainable investment,” encompassing investment approaches that include ESG factors in portfolio selection and management, across strategies such as ESG integration, corporate engagement and shareholder action, negative screening, and impact investment, among others.
The report indicated a significant shift in the strategies used for sustainable investing over the past few years towards more active methods. While in 2018, negative screening was the most commonly used strategy, ESG integration now significantly leads, with over $25 trillion in AUM employing this approach, well ahead of negative screening at $16 trillion (investment managers often employ more than one sustainable investment strategy). Corporate engagement and shareholder action is the next largest category, at approximately $10.4 trillion.
In a social media post announcing the publication of the new report, Simon O’Connor, GSIA Chair and CEO of the Responsible Investment Association Australasia (RIAA), said:
“Yes, sustainable & responsible investment continues to surge globally, reaching $35.3 trillion and constituting 36% of all professionally managed assets. But behind the numbers is an industry in transition, where standards are lifting, regulations are tightening, and expectations from consumers have risen.”
Other key findings from the report include:
- Canada has the highest proportion of sustainable investment relative to overall AUM at 62%, followed by Europe at 42%, Australasia at 38%, US at 33% and Japan at 24%.
- While still relatively small at under $2 trillion, Sustainability-Themed Investing is the fastest growing sustainable investing strategy, with a 4-year compound annual growth rate in AUM of 63%. ESG Integration is 2nd at a 25% CAGR.
- Institutional investors represent 75% of sustainable investment AUM, with professionally managed retail at 25%. This proportion is unchanged since 2018, although retail representation has grown significantly from 11% in 2012.
“It’s no longer enough to merely have commitments in place, sustainable and responsible investors must increasingly account for the short and long term impacts of those investments.”
Click here to view the full GSIA report.