SRI Strategies Expand To $6.57Tn AUM At The Start Of 2014 by US SIF
US sustainable, responsible and impact investing (SRI) has grown substantially over the past two years. The total US-domiciled assets under management using SRI strategies expanded from $3.74 trillion at the start of 2012 to $6.57 trillion at the start of 2014, an increase of 76 percent. These assets now account for more than one out of every six dollars under professional management in the United States.
The individuals, institutions, investment companies, money managers and financial institutions that practice SRI seek to achieve long-term competitive financial returns together with positive societal impact. SRI strategies can be applied across asset classes to promote stronger corporate social responsibility, build long-term value for companies and their stakeholders, and foster businesses or introduce products that will yield community and environmental benefits.
Through information requests and research undertaken in 2014, the US SIF Foundation identified:
- $6.20 trillion in US-domiciled assets at the beginning of 2014 held by 480 institutional investors, 308 money managers and 880 community investment institutions that apply various environmental, social and governance (ESG) criteria in their investment analysis and portfolio selection, and
- $1.72 trillion in US-domiciled assets at the beginning of 2014 held by 202 institutional investors or money managers that filed or co-filed shareholder resolutions on ESG issues at publicly traded companies from 2012 through 2014.
After eliminating double-counting for assets involved in both strategies, the overall total of SRI assets at the beginning of 2014 was $6.57 trillion. Throughout this report, the terms sustainable and responsible investing, sustainable investing, responsible investing, impact investing and SRI are used interchangeably to describe these investment practices.
The assets engaged in sustainable, responsible and impact investing practices at the start of 2014 represent nearly 18 percent of the $36.8 trillion in total assets under management tracked by Cerulli Associates. From 1995, when the US SIF Foundation first measured the size of the US sustainable and responsible investing market, to 2014, the SRI universe has increased tenfold, or 929 percent, a compound annual growth rate of 13.1 percent.
Highlights of the 2014 Report
The total assets that are managed with ESG factors explicitly incorporated into investment analysis and decision-making are valued at $6.20 trillion. Of this total, $4.80 trillion were identified within specific investment vehicles managed by money managers or community investing institutions, while $4.04 trillion were identified as owned or administered by institutional investors. (Of the institutional investor ESG assets, $2.64 trillion were identified through the responses and data that money managers provided on the portion of their vehicles held by institutional clients.)
ESG INCORPORATION BY MONEY MANAGERS AND INVESTMENT VEHICLES: The US SIF Foundation and its research partners identified 308 money managers and 880 community investing institutions that incorporate ESG issues into their investment decision-making, with a combined $4.80 trillion in assets under management. This is 3.4 times the corresponding figure for 2012, when money managers and community investing institutions held $1.41 trillion in ESG assets under management.
The significant growth in these ESG assets reflects several factors. These include growing market penetration of SRI products, the development of new SRI products and the fuller integration of ESG criteria by numerous large asset managers across wider portions of their holdings. Furthermore, the past two years have seen a growing commitment on the part of institutional investors and asset managers to the Principles for Responsible Investment, a global framework for taking ESG considerations into account in investment analysis, decision-making and active ownership strategies.
The broad outlines of the ESG issues incorporated by money managers are as follows:
- Environmental investment factors are incorporated in the management of 672 investment vehicles with $2.94 trillion in assets under management,
- Social criteria, which include Sudan-avoidance policies and community-related investment policies, are the most prominent in asset-weighted terms, incorporated in the management of $4.27 trillion across a wide range of 770 investment vehicles,
- Governance issues are incorporated by a total of 501 investment vehicles with $3.53 trillion in assets, and
- Product-specific criteria, such as restrictions on investment in tobacco and alcohol, are included in the management of 445 investment vehicles with $1.76 trillion in assets.
The assets and numbers of funds incorporating ESG criteria have continued a trajectory of dramatic growth since 2007. These assets, excluding assets of separate account vehicles and community investing institutions, have increased to $4.31 trillion in 925 distinct ESG funds in 2014, more than four times the $1.01 trillion tracked in 2012, as shown in Figure B.
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