Sustainable & Responsible Investing: It's Now $1-in-$6 in the US Capital Markets!

Submitted by Hank Boerner

For your conversations inside the company, and perhaps outside, the following key numbers should help you make the investing or business case for corporate responsibility:

• At the end of 2013, $1 in every $6 of Assets Under [professional] Management ("AUM") in the USA was being [invested] using sustainable and responsible, and impact investing strategies by professional money managers and the owners they serve.

• The magic number was $6.57 trillion AUM being managed by some strategies, approach, methodology, models, that are being characterized by a number of terms: sustainable investing; sustainable & responsible investing; socially responsible investing; impact investing; community investing; ethical investing; investing considering corporate ESG performance.

• That is about 18 percent of the total AUM in the USA (an encouraging $36.8 trillion total after the recent recession) -- using all approaches to portfolio management including SRI.

• Growth?  From 1995, the first time the trade association Forum for Sustainable & Responsible Investment (US SIF) conducted its survey of SRI AUM at year-end 1995 to the latest survey (year-end 2013), the growth of S&R investment was 929%. (That, you may point out, is a compound growth rate of 13.1% -- often outpacing the growth of the overall US capital markets AUM).  Including through the dark days of 2007-2009, when the growth of SRI was characterized as a "flight to safety," and away from Lehman Bros, etc.

• The survey results for year-end 2011, the prior survey conducted by US SIF:  SRI Assets Under Management were $3.74 trillion -- that was about $1 in every $8 or $9 being managed.

Many asset "owners," such as public employee pension systems, religious institutions, educational institutions, university endowments, foundations, and other types of fiduciaries hire outside money managers to guide their investments.  (Some owners such as New York State Common Fund, one of the largest public employee funds in the USA, do a considerable amount of money management using internal staff with assistance from external money managers.)  If you take the roster of your company's shareowners you will likely see the names of these fiduciaries among your top 20 or 30 holders.  They are an important source of long-term, stable investment welcomed by board and C-suite.

• These types of assets owners applied ESG criteria for decision-making for $4 billion-plus of their assets -- a 77% growth since the last survey.

US SIF commissions the survey to take the pulse of the US capital markets to determine the importance of sustainable and responsible investment approaches being used by professional money managers -- institutions, investment companies, asset managers working for asset owners, mutual fund advisors, individuals, and others. The survey is conducted every other year.  The results of the year-end 2013 state of S&R investing were released in November at Bloomberg LP in New York City.

This was the 10th survey; respondents included 480 institutional investors; 308 professional money managers; and 880 community investment institutions that apply various ESG (environmental, social, governance) criteria in their investment management activities.

Climate change issues remained an important environmental issue for investors from last survey to this one; money managers managing $276 billion AUM, and institutional investors, $551 billion, cited climate change.  Shareholders concerned about the climate filed 72 proxy resolutions on the subject in 2014 -- double the number filed in 2012.  The concerned investors are negotiating commitments from public company managements to disclose and reduce greenhouse gas emissions.

You can find more about "US Sustainable, Responsible and Impact Investing Trends 2014" on the US SIF web site: http://www.ussif.org/

Check it out:  Many of the arguments you make internally and externally about the importance of sustainable & responsible investment are supported "chapter and verse" in the survey.

Oh, and if you hear "this is a fringe activity," note the mainstream sponsors of this year's survey effort:  Bank of America, TIAA-CREF, BlackRock, Morgan-Stanley, Legg Mason.  And Bloomberg -- which has built significant resources for investors to track and evaluate corporate ESG performance in its 300,000+ terminals worldwide.