Reflections on Sustainable, Responsible and Impact Investing in 2016

The demand for sustainable and impact investing is growing — investors now consider environmental, social and governance (ESG) factors across $8.72 trillion of professionally managed assets, a 33 percent increase since 2014.

Money managers and institutional investors are scrutinizing an array of concerns—including climate change, weapons production, human rights and corporate political spending and lobbying—across a broader span of assets than in 2014. A diverse group of investors is seeking to achieve positive impacts through such strategies as corporate engagement or investing with an emphasis on community, sustainability or the advancement of women.

Client demand is one of the major drivers for money managers that introduce products that take ESG factors into account. Indeed, evidence of the growing interest in sustainable investing is the recent launch of services that issue ratings for thousands of mutual funds and exchange traded funds on the ESG profiles of their portfolio companies. A number of organizations are also assessing mutual funds and other investment firms on how they are voting their shares on ESG issues, and whether the voting policies are consistent with their professed ESG concerns. Meanwhile, a major policy win took place in October 2015, when the US Department of Labor issued a bulletin that facilitates the ability of private sector employers to add SRI fund options to retirement plans.

The market size of sustainable, responsible and impact investing in the United States in 2016 is $8.72 trillion, or one-fifth of all investment under professional management.

As the field grows, some growing pains are to be expected. A continuing concern first identified in the 2014 Trends report is the significant growth of ESG assets for which limited information is disclosed. Increasing numbers of money managers report that they incorporate ESG factors, but do not disclose the specific criteria used (such as clean technology and labor issues).

Through the US SIF Foundation survey process, money managers and institutional investors could select up to 32 criteria, divided into environmental, social, governance and product-related categories. They also had an option to specify any additional ESG criteria they considered.

As US SIF and the US SIF Foundation noted in our 2016–2018 Strategic Plan, there is an opportunity to enhance the rigor of the field. We aim to provide the education and research that will help bring new entrants to the field, point practitioners and other stakeholders to best practices and provide a forum for professionals to engage and learn from one another.

It is our hope that US Sustainable, Responsible and Impact Investing Trends 2016 provides you with an expansive understanding of sustainable, responsible and impact investing as it exists today and inspires you to join us in taking this important work forward.

Please visit www.ussif.org for more information on our work.

For additional Trends Report findings and information please visit www.ussif.org/trends