2022 Report on US Sustainable Investing Trends: Executive Summary

This edition of the Trends report, like the 13 previous editions, tallies the assets under management (AUM) of investment professionals who use one or more strategies of ESG incorporation and/or file or co-file shareholder resolutions at publicly traded companies on environmental, social and governance (ESG) issues. ESG incorporation strategies used by investors include: ESG integration, positive/best in-class screening, negative screening, impact investing and sustainability-themed investing.

After the 2020 Trends report, however, the US SIF Foundation decided to modify its methodology for the 2022 report. In a departure from previous editions, this report does not include the AUM of investors who stated that they practice firm-wide ESG integration but did not provide information on any specific ESG criteria they used (such as biodiversity, human rights or tobacco) in their investment decision-making and portfolio construction. The US SIF Foundation committed to this approach after the 2020 Trends report found that ESG integration had become mainstream and was applied across trillions of dollars, but with limited disclosure on specifics. This continued a phenomenon first identified in the 2014 Trends report.

The US SIF Foundation’s new modified methodology includes the following for ESG incorporation:

• The AUM of investors, investment vehicles (e.g., mutual funds, private equity funds, separate accounts, other commingled funds), and pools of assets with one or more specific ESG criteria incorporated in investment decision-making and portfolio construction.
• The AUM of specific funds (e.g., mutual funds, exchange-traded funds, closed-end funds) for which money managers identify ESG or sustainability as integral to their investment decision-making and portfolio construction in the fund’s prospectus, even without providing specific ESG criteria.

This modified methodology distinguishes between a firmwide reference to ESG integration and a fund-level ESG strategy. While the total assets of a money manager that references ESG integration across the firm without the identification of any specific criteria are not counted in this year’s report, a fund that explicitly references ESG integration as part of its investment decision-making and portfolio construction in its prospectus is included in total ESG assets under management. However, the name of a fund with “ESG,” “sustainable” or similar terms was insufficient, in itself, for the fund to be included.

At the same time that respondents were reporting their data to the US SIF Foundation, the Securities and Exchange Commission (SEC) released two proposals that focused on preventing misleading or deceptive fund names and requiring more detailed ESG disclosure by funds and advisors. Trends researchers immediately began to see multiple asset managers reporting a modest to steep decline in ESG AUM as compared to their responses in 2020. The US SIF Foundation believes that these SEC proposals are motivating asset managers to be more circumspect in what they consider to be assets that incorporate ESG criteria. The organization supports the intent of the SEC proposals and submitted comments that it believes will lead to more effective rulemakings.

The modified methodology, as well as the change in asset manager reporting, has resulted in the sustainable investment AUM in this report coming in significantly lower—$8.4 trillion in 2022, compared to $17.1 trillion in 2020 (see Figure A at Top of page). The $8.4 trillion represents 12.6 percent, or one in eight dollars, of the $66.6 trillion in total US assets under professional management.

This phenomenon is similar to what occurred in Europe after the EU’s Sustainable Finance Disclosure Regulation required enhanced disclosure on sustainable investment products. See the Methodology chapter of the report for further details.

Overview

Through surveying and research undertaken in 2022, the US SIF Foundation identified, as shown in Figure B, above:

• $7.6 trillion in US-domiciled assets at the beginning of 2022 held by 497 institutional investors, 349 money managers and 1,359 community investment institutions that practice ESG incorporation—applying various ESG criteria in their investment decision-making and portfolio selection.
• $3.0 trillion in US-domiciled assets at the beginning of 2022 held by 224 institutional investors or money managers that filed or co-filed shareholder resolutions on ESG issues at publicly traded companies from 2020 through 2022.

 

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