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Big News: US SIF Report on US Sustainable and Impact Investing Trends 2020 Released

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Big News:   As 2020 Began, $1-in-$3 of Professionally Managed AUM in the United States Had ESG Analysis and/or Portfolio Management Strategies Applied…US$17.1 Trillion Total

November 2020 — Every two years, since 1996, the influential trade organization for sustainable, responsible and impact investment (US SIF) conducts a year-long survey of professional asset managers to determine the total of USA-based assets under management (“AUM”) that have ESG analysis and/or portfolio management applied.

The Trends report just released charts the AUM with ESG analysis and strategies in the United States at $16.6 trillion at the start of 2020 – that’s 25X the total since the first Trends report in1996, with compounded growth rate of 14 percent. (The most rapid growth rate has been since 2012, says US SIF.)

Consider: This means that today, $1-in-$3 of professionally managed assets in the United States follows analysis and/or strategies considering ESG criteria. (The total of US assets under professional management at the start of 2020 was $51.4 trillion.)

This is a dramatic 43% increase over the survey results of the 2018 Trends report – that effort charted a total of $11.6 trillion in ESG-managed AUM in the USA at the start of 2018.

The survey respondents for the current Trends report identified the ESG-focused AUM practices of 530 institutional investors; 384 money managers; 1,204 community investment institutions – all applying environmental, social, and corporate governance criteria in their portfolio management.

What are top ESG issues identified by money management professionals in the survey effort?

  • Climate Change-Carbon: $4.18 trillion – #1 issue
  • Anti-Corruption: $2.44T
  • Board Room Issues: $2.39T
  • Sustainable Natural Resources/Agriculture: $2.38T
  • Executive Compensation: $2.22T
  • Conflict Risk (such as repressive regimes or terrorism, this cited by institutional investors): $1.8T

Note that many strategies and ESG analysis and portfolio management approaches can be overlapping.

Lisa Woll, US SIF Foundation CEO explains: “Money managers and institutional investors are using ESG criteria and shareholder engagement to address a plethora of issues including climate change, sustainable natural resources and agriculture, labor, diversity, and political spending. Retail and high net worth individuals are increasingly using this investment approach, with $4.6 trillion in sustainable investment assets, a 50% increase since 2018.”

The 2020 Trends report counts two main strategies as “sustainable investing” – (1) the incorporation of ESG factors in analysis and management of assets and (2) filing shareholder resolutions focused on ESG issues.

What are the top issues for the professional asset owners, their managers, and other investment professionals participating in the survey? Gauging the leading ESG issues for 2018-to-2020, examining the number of shareholder proposals filed, the Trends report charts the following in order of importance:

  • Corporate Political Activity
  • Labor & Equal Employment Opportunity
  • Climate Change
  • Executive Pay
  • Independent Board Chair
  • Special Meetings
  • Written Consent
  • Human Rights
  • Board Diversity

Looking at the 2020 Trends report, we have to say — we’ve certainly come a long, long way over the years. When first Trends survey was conducted at the end of 1995, the total AUM was just US$639 billion. The shift to sustainable, responsible, impact investment was underway! (The report released on November 16th is the 13th in the series.)

For information about the US SIF Report on US Sustainable and Impact Investing Trends 2020, and to purchase a copy of the report: https://www.ussif.org/trends

Governance & Accountability Institute is a long-time member of the Forum for Sustainable and Responsible Investment (US SIF) and a sponsor of the 2020 Trends report. US SIF is the leading voice advancing sustainable and impact investing across all asset classes.

Members include investment management and advisory firms, mutual fund companies, asset owners, research firms, financial planners and advisors, community investment organizations, and not-for-profits. The work is supported by the US SIF Foundation that undertakes educational and research efforts to advance SIF’s work.

Louis Coppola, G&A EVP and Co-founder, is chair of the SIF Company Calls Committee that arranges meetings of SIF member organizations with publicly-traded companies to discuss their ESG/Sustainability efforts.

US SIF Trends 2020 Report Published November16, 2020:

There, In The Company’s 401-K Plan – Do You Have the Choice of ESG Investments? Ah, That Would Have Been Good For You to Have in the Recent Market Downturn…

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June 2020

by Hank Boerner – Chair & Chief Strategist – G&A Institute

As many more institutional investors — asset owners, and their internal & outside managers — move into ESG / sustainable investing instruments and asset classes, the question may be asked: What about the individual investor…the family huddling to discuss what to do in the midst of the virus crisis to protect their retirement savings?

Are they offered “resilient choices” to stash their future funds? Bloomberg Green provides some answers in “ESG Funds Are Ready for Your Retirement Plan”.

Emily Chasan, in our view one of the finest of the sustainability editors in the nation today, explores the impact (or lack of) on individual / family investors in mutual funds and ETFs aiming to better protect their nest egg for the future.

For starters, fortunately, while some ESG mutual fund management (advisory) companies may not have set out to protect their investors in an unforeseen global pandemic…but…the ESG funds they manage are proving to be quite resilient during the recent market collapse. These would seem to be good choices for individuals. But the opportunity to partake is missing.

Fund managers, Emily explains, avoided risk (deliberately) by using corporate ESG scores as an important proxy for assembling their roster of well-managed, adaptable, investable companies…such as those companies with far-sighted executives who were planning for an existential climate shock. That planning paid off in the pandemic crisis.

Prioritized by leading asset managers for their [ESG} funds: tech, financial services and healthcare equities, and renewable energy companies. For demonstration of concept, Allianz, BlackRock, Invesco and Morningstar found their ESG investments were performing better than the more traditional investment vehicles in the dark market days of early 2020.

And, a BlackRock study found that more than three-quarters of sustainable indexes outperformed better than the traditional investor benchmarks from 2015 to the market drop in 2020. (How about this for proof of concept: 94% of sustainable indexes outperformed!)

Speaking at a World Business Council for Sustainable Development (WBCSD) conference, BlackRock’s director of retirement investment strategy, Stacey Tovrov, explained: “Sustainable Investment can provide that resilience amid uncertainty [when we really want to ensure we’re mitigating downside for retirement savers]’”.

So how come, asks Bloomberg Green, why are ESG funds largely missing from a US$9 million “chunk of the market, comprised of corporate retirement plans”?

In the USA, retirement accounts represented one-third of all household wealth going into the market downturn (investment in the family home is larger). But only 3% of 401-k plans offered ESG funds. And less than 1% of these funds are invested in ESG vehicles.

Perhaps the fiduciaries (the employer sponsoring he retirement plan, the outside investment advisors hired on to manage the plan) are just too cautious, too concerned that ESG investing will in some way negatively impact them.

So, we can say, these results should (operative word!) convince corporate retirement managers overseeing 401-k plans that the individual investor is actually being negatively impacted by being absent from the ESG choices, from the opportunities offered by ESG / sustainable investing approaches that many institutions enjoy.

As “Human Capital Management” steadily becomes an important aspect of board and C-suite strategy, oversight, measurement and management (and results), Emily Chasan suggests that the coronavirus crisis will reshape the fundamental relationship between employers and their workforce.

Re-structuring the retirement plan offerings is a good place for C-suite to start re-examining the why, what and how of offerings in their sponsored plans. “One place to start changing attitudes might just be offering workers the chance of a more resilient retirement,” Emily Chasan tells us.

For corporate executives and managers seeking more information about this we recommend our trade association’s web site. Numerous members of the U.S. Forum for Sustainable and Responsible Investment (US SIF) offer mutual funds, ETFs, separate accounts, and other investment opportunities. There’s information on Climate Change and Retirement on the website. See: https://www.ussif.org/

We also offer a selection of ESG / Sustainable & Responsible Investment items for you this issue.

Top Stories

ESG Funds Are Ready for Your Retirement Plan
(Source: Bloomberg Green / Emily Chasan) Not many ESG fund managers set out to protect investors from a global pandemic. But their funds have nevertheless proven resilient during the subsequent market collapse.

Other Top Stories of Interest

S&P Launches ESG Scores Based on 20 Years of Corporate Sustainability Data (Source: Environmental & Energy Leader) S&P Global has announced the launch of its S&P Global environmental, social, and governance (ESG) Scores with coverage of more than 7,300 companies, representing 95% of global market capitalization.

MSCI Makes Public ESG Metrics for Indexes & Funds to Drive Greater ESG Transparency (Source: MSCI) MSCI today announced that it has made public the MSCI ESG Fund Ratings provided by MSCI ESG Research LLC for 36,000 multi-asset class mutual funds and ETFs, and MSCI Limited has made public ESG metrics for all of its indexes covered by the European Union (EU) Benchmark Regulation (BMR). The ESG ratings and metrics are available as part of two new search tools now available to anyone on the MSCI website.

ESG Funds Outperforming S&P 500 this Year (Source: Pension & Investments) Investment funds set up with ESG criteria remain relative safe havens in the economic downturn caused by the coronavirus pandemic, according to an analysis released Wednesday by S&P Global Market Intelligence.

Five Actions Business Leaders Can Take to Create A More Sustainable Future (Source: D Magazine) As a Dallas-based business executive and environmentalist, I believe the marketplace can offer solutions for the environment. These solutions need not be at odds with economic growth and can actually be profitable when consumers…