Investors have become increasingly aware of the importance of such issues as climate change, resource scarcity, labor rights and corporate governance to financial returns. We believe this helps to explain the growth in assets under management (AuM) that are classified as Environmental, Social and Governance (ESG).
In this article, we examine trends in ESG AuM and their various classifications. We then consider how these responsible investment strategies have been influenced by the adoption of voluntary codes and principles by asset owners and managers as well as the increasing scope and pace of mandatory legislation.
The latest data from the Global Sustainable Investment Association (March 2017) shows that ESG investing grew 25% over the past two years to reach USD 22.89 bn. In the U.S., ESG assets at the beginning of 2016 had risen by 33% yearon-year to reach USD 8.72 tn. As a result, ESG AuM in the U.S. now represents over 20% of all assets under professional management, an increase from 11% since the 2012 USSIF survey.