(Photo Credit: M. B. M. on Unsplash)Sustainable fund assets under management in the US achieved limited gains in 2017. Estimated net inflows, including new 2017 fund launches, were $2.9 billion or 1.5%, according to new research from Sustainable Research & Analysis. However, as sustainable investing shifts away from a focus on purely ethical strategies to one of integrating ESG to improve fundamental investment decisions, with increasing emphasis on shareholder engagement and proxy voting, funds flowing into the sector will likely increase, according to report author Henry Shilling.
At the same time, corporations that are engaging with sustainable fund managers are evolving in terms of environmental management, leading to changes in commitments on products, processes or practices.
The growth trend is expected to accelerate with the entry of traditional investment managers. Firms such as JPMorgan, Morgan Stanley, PIMCO AllianceBernstein Investments and Fidelity have entered the sustainable investment sphere with new and repurposed fund offerings. In the process, five traditional organizations shifted about $13.7 billion in assets into the sector, and two firms moved into the ranks of the top 10 based on assets.
These and other managers are expected to continue to introduce more robust product offerings that should lift returns over time, attracting a larger segment of individual and institutional investors, according to the report.
Investors are increasingly looking for opportunities to invest in companies that are engaging in environmentally responsible practices, willing reporting on the risks they face from climate change, and outlining the opportunities that come from addressing them.
HSBC, one of the world’s largest banking and financial services institutions, for example, has committed to provide $100 billion in sustainable financing and investment by 2025. The bank will intensify its support for clean energy and lower-carbon technologies, as well as projects that support the implementation of the United Nations’ Sustainable Development Goals (SDGs).
Results of an S&P Global study released last fall showed that nearly all (95%) of respondents plan to engage with companies they invest in about issues related to the SDGs. Investors say their assessment of a company’s environmental, social and governance (ESG) profiles have evolved from a simple measure of corporate responsibility to a key driver of an investor’s decision-making.
