ESG Incorporation by Money Managers
From the US SIF Foundation
The US SIF Foundation identified 384 money managers and 1,204 community investing institutions incorporating ESG criteria into their investment analysis and decision-making processes. The $16.6 trillion in ESG incorporation assets they represent is a nearly 43 percent increase over the $11.6 trillion in such assets identified in 2018.
Of this 2020 total:
- $4.6 trillion were managed on behalf of individual investors, and $12.0 trillion were identified as managed on behalf of institutional investors as shown in Figure B.
- $3.1 trillion — 19 percent — were managed through registered investment companies such as mutual funds, exchange-traded funds, variable annuities and closed-end funds, as shown in Figure C.
- $716 billion — 4 percent — were managed through alternative investment vehicles, such as private equity and venture capital funds, hedge funds and property funds.
- $266 billion in assets were managed by community investing institutions.
- $985 billion in money manager ESG assets were managed through other commingled funds.
- The majority — $11.5 trillion, or 69 percent — remains largely opaque as they were managed through undisclosed investment vehicles and the managers for 60 percent of these undisclosed vehicles — $6.9 trillion — also did not disclose the specific ESG factors that they consider, reporting only that they consider ESG in general.
In terms of assets, money managers incorporate ESG factors fairly evenly across environmental, social and governance categories, as shown in Figure D, above.
- Overall, in asset-weighted terms, money managers incorporated social factors slightly more than environmental and governance criteria. Social criteria incorporation by money managers increased 49 percent from 2018 to $16.1 trillion.
- Environmental criteria as a whole grew faster than social or governance factors over the past two years, increasing 57 percent, from $10.1 trillion to nearly $16.0 trillion.
- Among all specific ESG criteria, governance factors related to executive pay saw the greatest growth, increasing 122 percent since 2018 to $2.2 trillion, as shown in Figure E.
- However, climate change remains the most important specific ESG issue considered by money managers in asset weighted terms. The assets to which this criterion applies increased 39 percent from 2018 to 2020 to $4.2 trillion, also shown in Figure E.
- Anti-corruption was the largest governance criterion, with growth of 10 percent from 2018, affecting $2.4 trillion in money manager assets.
- Board issues also ranked high among the top specific ESG criteria for money managers, affecting $2.4 trillion in assets under management, a 66 percent increase from 2018.
- Sustainable natural resources and agriculture grew by 81 percent to $2.4 trillion in assets under management.
- Conflict risk was the largest social criterion at $1.8 trillion assets under management, although this was a decrease from 2018 of 22 percent.
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