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November 24, 2012

US SIF Publishes Biennial Sustainable Investment Trends Report
    by Robert Kropp

The 2012 Trends Report notes a total of $3.74 trillion in assets allocated to sustainable investment, a 22% increase over a two-year period.

SocialFunds.com -- The recently published 2012 Report on Sustainable and Responsible Investing Trends in the US from US SIF: The Forum for Sustainable and Responsible Investment indicates that assets allocated to sustainable investment strategies continue to rise, as they have throughout the past decade. By the end of 2011, $3.74 trillion were invested by means of such strategies as incorporation of environmental, social, and corporate governance (ESG) criteria and shareowner engagement.

The total represents a 22% increase over sustainable investment at year end 2009, which stood at $3.07 trillion. By the end of 2011, 443 institutional investors, 272 money managers and 1,043 community investment institutions with assets in excess of $3.3 trillion were incorporating ESG criteria, and an additional 200 institutional investors or money managers, with assets of $1.54 trillion, had filed or co-filed shareowner resolutions on ESG issues.

Modern sustainable investment traces its history back to the campaign to end apartheid in South Africa, and social issues relating to investment in Sudan remain a central concern for sustainable investors. More than $1.63 trillion in institutional assets are invested according to policies relating to Sudan. While negative screening continues to be the predominant ESG incorporation strategy, "a larger number of money managers also disclosed incorporating ESG issues in $812 billion in assets using positive or inclusionary strategies or ESG integration," the report found.

The rise of positive screening is an important development in the evolution of sustainable investment. Noting that the 2010 Trends Report found that 90% of sustainable assets were devoted to some form of negative screening, Cary Krosinsky of Trucost wrote in his foreword to Evolutions in Sustainable Investment: Strategies, Funds and Thought Leadership, "Take a purely values-based approach, and you risk missing the very same practical opportunities in eco-efficiency and innovation, where the sustainability we require will come from."

In other words, as Mindy Lubber, president of Ceres, stated earlier this year, "Sustainability has yet to gain traction at anywhere near the scale and speed required given the global threats we face." And despite the increase in assets allocated to sustainable investment strategies, less than one percent of allocations by pension funds is devoted to such projects as sustainable energy sources and clean technology. According to some estimates, as much as 85% of funding for the transition to a low-carbon and climate resilient global economy will have to come from private investment.

Another important development is the dramatic increase in the number of investment funds incorporating ESG criteria in their investment strategies. The report found that 720 such funds, with $1.01 trillion in assets under management, now do so, a 78% increase over the assets tracked in 2010.

Also, community investment through such institutions as community development financial institutions (CDFIs) experienced a 47% increase in assets over 2010, and now stands at $61.4 billion. The impact of CDFIs and other community institutions is magnified by their ability to leverage their assets with public dollars.

"We are buoyed by the many advances our field has made, and by the continued growth in assets that aim to integrate financial returns with environmental, social and governance impacts," US SIF CEO Lisa Woll wrote in her foreword to the report. "And yet, it is clear we have much more to do in order to further advance the scale of sustainable and responsible investment and to effectively grapple with other challenges to building a robust, equitable and sustainable economy."

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