By the Social Investment Forum
Over the past decade, SRI growth within US financial markets has been shaped by numerous trends:
Money managers are increasingly incorporating ESG factors into their investment analysis, decision-making and portfolio construction, awakening to the demand for ESG investing products and services from institutional and individual investors. Of the managers that responded to survey questions on their reasons for incorporating ESG criteria into investment management, more (85 percent) cited client demand more than any other reason.
Institutions—particularly public funds—are incorporating ESG criteria in part because of legislative mandates. Among the institutions that responded to survey questions about why they incorporated ESG factors into their investments, 52 percent cited regulation or legislation more than any other reason.
Increasing numbers of institutional investors and money managers are addressing the crisis in the Sudan, whether through targeted divestment or active engagement with companies exposed to the risks of doing business in such a volatile, repressive regime. Indeed, Sudan-related investment policies have displaced tobacco as the most prevalent ESG criteria incorporated into investment management, affecting more than $1.3 trillion in institutional assets and nearly $450 billion across all investment vehicles included in the money manager phase of research.
New products and fund styles are driving growth in ESG investment vehicles, especially among ETFs and alternative investment funds such as social venture capital, double- and triple-bottom-line private equity and responsible property funds.
Environmentally themed investment products and services are rapidly emerging to meet growing investor desire to manage environmental risks and seize opportunities in clean and green technology, alternative and renewable energy, green building and responsible property development, and other environmentally driven businesses.
Regulatory developments as well as the rise of various investor services have encouraged investors to take a more thoughtful approach to proxy voting. It is no longer uncommon for shareholder proposals on governance issues to receive majority support, or for shareholder proposals on social and environmental proposals to win the support of 30 percent or more of the shares voted.
Several legislative and regulatory developments in 2009 and 2010 have set higher standards for corporate disclosure on ESG issues and could help make corporate managements and boards more accountable to shareholders and other stakeholders.
A growing number of institutional investors and money managers are joining investor networks not only to coordinate their work on shareholder resolutions but also to advance their shareholder advocacy through public statements and other policy initiatives.
The growth in community investing—as measured by the assets of community development depository institutions—has been fueled in large part by consumer demand. Community banks have grown rapidly by meeting the pent-up demand of communities previously underserved by mainstream banks. Community development credit unions have benefited from increased membership, assets and deposits from consumers dissatisfied with mainstream banks that had raised fees or cut back on credit when the recent US recession unfolded.
A second factor in community investing institutions’ asset growth has been the capital they have received as US Treasury programs stepped up assistance to community development financial institutions in 2009 as part of economic stimulus and recovery programs.
In addition, a number of campaigns, touting such concepts as “program-related investing” and “impact investing” have helped to increase awareness among foundations, other institutional investors and high-net-worth individuals of the high social impact associated with community investing strategies.
