Professional asset management firms that incorporate ESG issues into their investment decisions account for more than one fifth of the global total of assets under management, according to the Forum for Sustainable and Responsible Investment (US SIF).
Asset managers that take into account ESG principles manage assets with a total value of $13.6 tn, which accounts for 21.8 percent of all professionally managed assets in Europe, Asia and North America, says the forum, previously known as the Social Investment Fund.
‘The sustainable investment industry has significant scale in the global arena,’ US SIF says in its Global Sustainable Investment Review 2012. ‘This is encouraging at a time when many parts of the financial industry are under pressure to demonstrate value and it shows there are high levels of investor interest around the world in financing the business, projects and ideas needed to drive sustainable growth.’
Europe represents by far the largest source of assets under management using ESG criteria, with $8.76 tn in such assets, according to the report. The US is next, with $3.74 tn, followed by Canada, which has $589 bn. Together, Canada, the US and Europe account for 96 percent of all assets under management following ESG criteria. Asia minus Japan trails the world, with a mere $60 bn under ESG-aware management, while Japan has $10 bn.
Europe also leads the world in terms of the proportion of assets under ESG-aware management by comparison with total assets overall: 49 percent of assets under management on the continent are managed according to some form of ESG criteria. Africa is next, at 35.2 percent, followed by Canada at 20 percent, Australia at 18 percent and the US at 11.2 percent, the report shows.
The most common method for taking into account ESG principles is an exclusionary approach, where asset managers avoid certain companies, sectors or practices. This management style accounts for a total of $8.3 tn in assets under management, according to the study. In second place is an integration approach that incorporates ESG criteria into traditional financial analysis, which covers almost $6.3 tn in assets. Third is corporate engagement and shareholder action, with about $4.7 bn. This approach seeks to directly engage companies to improve governance through direct communication with management, shareholder proposals and proxy voting guided by clear ESG principles.
