The TakeAway: Nearly one out of every eight dollars professionally managed in the US employs sustainability criteria, according to the Social Investment Forum SRI Trends Report.
As the US economy slumped into the worst recession since the ‘30s over the last few years, socially responsible investing (SRI) in the US continued to surge, eclipsing the near-flat growth of the total universe of assets under management. That’s the headline finding of the biannual SRI Trends Report released yesterday by the nonprofit Social Investment Forum (SIF) and its Foundation. By the end of 2009, assets worth more than $3.07 trillion (count those zeros!) engaged in SRI strategies – the use of environmental, social and governance (ESG) criteria, shareholder advocacy, and/or community investing – up 13 percent from $2.71 trillion at the beginning of 2007. During the same period, the broader universe of professionally managed assets stagnated, growing less than 1 percent.
Despite these gains, however, huge challenges lie ahead for the full integration of sustainability factors into economic decision-making and regulatory systems. While it’s promising that one in eight dollars in the US gets invested with sustainability considerations, the remaining seven dollars (more than $22 trillion in aggregate) don’t. In addition to institutional investors adding ESG analysis to their due diligence and shareholder engagement to their risk management, the broader public can play a key role in promoting a more sustainable and just society by investing in mutual funds and pension options that employ ESG factors. On the political front, the SRI community needs to maintain vigilance to continue pushing for Wall Street reform legislation and regulation in the face of a Republican majority in the House nitpicking and delaying key components of Dodd-Frank.
To avoid double counting, lead author Joshua Humphreys of the Tellus Institute and SIF Director of Research Meg Voorhes continued the Trends Report practice of breaking down the numbers by category:
- $2.5 trillion in assets applied some form of ESG analysis to investment selection and portfolio construction. Within this mix, Sudan, terrorist state criteria, Iran, the environment (particularly clean tech and climate change), human rights, and fair labor were – in that order – primary social policy concerns for public institutional investors, largely due to legislation and regulatory pressures;
- $1.5 trillion in assets filed or co-filed shareholder resolutions on ESG issues from 2008 through 2010. This includes more than 200 institutions collectively controlling $1.5 trillion; and
- $41.7 billion in assets have a specific community investing focus, deposited or invested in banks, credit unions, venture capital funds, and loan funds. This represents an increase of more than 60 percent from 2007.
Institutional investors still lead the pack, with $2.3 trillion in assets involved in sustainable and responsible investing strategies. These investors include state and local pension funds, labor unions, private corporations, faith-based institutions, nonprofit endowments, foundations, hospitals and health care plans. The remainder represents money managers and other investment vehicles, including:
- mutual funds (250 different ones, totaling $316.1 billion);
- exchange-traded funds (26 ETFs valued at $4.0 billion);
- alternative investment funds (177, worth $37.8 billion);
- other pooled products (35 of those, totaling $211.4 billion); and
- separate accounts (232, valued at $122.4 billion).
Behind the dazzling numbers and impressive gains, the SRI community continues to do the less glamorous public policy work to support federal rulemaking and implementation of key provisions of Dodd-Frank legislation that move us toward a more sustainable and just economy.
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