SRI Grows to Over $3 Trillion in U.S.
By Sara Laks
The sustainable and responsible investing (SRI) industry has grown to over $3 trillion in assets under professional management, as reported by the 2010 Report on Socially Responsible Investing Trends in the United States from the Social Investment Forum (SIF). This figure includes the use of ESG (environmental, social, governance) analysis, shareholder advocacy, and/or community investment strategies.
Growing Market Share
The aggregate $3 trillion represents a more than 13% increase in AUM since the start of 2007 when this market research was last conducted. The numbers become even more striking when compared against the broader universe of professionally managed assets, which grew by less than 1% between 2007 and 2010.
And this development is not limited to the United States. In Australia, the Responsible Investment Association Australasia (RIAA), reports that the responsible investment market (a combination of specialized managed funds, community finance, green loans, RI charity investments and financial advisor portfolios) grew 13% over the fiscal year ending June 30, 2010, surpassing the 9% growth of the broader conventional asset universe during that same time period. The same report notes that over half of all funds under management in Australia are now signatories to the United Nations Principles for Responsible Investment (UNPRI).
This information begs the three-trillion dollar question; why has the SRI space enjoyed such robust growth, during a period of global economic slowdown?
To start, green, socially conscious investors have benefited from an expansion of quantity and improvement in quality of investment products and services designed to make money and make a difference. The global growth of the SRI industry has tracked the increasing public interest in sustainability and all things “green.” From slow food, to green building, to climate change, people are paying more attention to their impacts on the world; they are asking more questions about how their actions impact the commons known as planet earth.
Although many tend to focus on the “E” (for Environment) in ESG, interest in the role of corporate governance or the “G” has risen tremendously over the last few years. In the wake of the scandals, meltdowns, and corruption that have often dominated financial headlines, many investors have lost trust in mainstream financial institutions and are looking for greater transparency and accountability. Investors are paying closer attention to corporate character and want increased corporate disclosure. Legislative and regulatory developments are demanding the same, and have set new standards that make better corporate governance not only an issue, but a competitive advantage.
Greater social awareness has also played a large part in fueling the growth. For many, the bottom line of sustainable and responsible investing is impact on people and society at large. Assets in community investing rose from $25 billion in 2007 to $41 billion in 2010—60% growth in the amounts invested in community development banks, credit unions, loan funds, and venture capital funds. Another powerful growth factor has been large scale divestment in Sudan. The SIF Report found that, “…Sudan-related investment policies have displaced tobacco as the most prevalent ESG criteria incorporated into investment management, affecting more than $1.3 trillion in institutional assets and nearly $450 billion across all investment vehicles included in the money manager phase of research.”
One out of Every Eight Dollars
These and other factors have helped shaped today’s market and distributed almost 1 out of every 8 dollars under professional management in the U.S. into sustainable and responsible investment strategies. Although analysts have historically considered SRI as separate from “the mainstream,” the most current figures suggest that the SRI industry itself is a significant shareholder in the broader investment universe.
Posted: December 27, 2010