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Global sustainable investment assets rise sharply

The Global Sustainable Investment Alliance (GSIA) has released its biennial Global Sustainable Investment Review 2016, which shows that global sustainable, responsible and impact (SRI) investment assets reached $22.89 trillion at the start of 2016,  25% more than in 2014.

The report brings together the findings of the sustainable investment forums from Europe, the United States, Canada, and Australia and New Zealand. Data from Asia was provided by the Japan Sustainable Investment Forum and the UN’s Principles for Responsible Investment.

In nearly every market covered by the report, sustainable investing grew in both absolute and relative terms since the beginning of 2014, according to the GSIA. The review shows that Europe accounts for over half the global SRI assets (53%), and the United States for 38%.

More information on the sustainable investing activities of institutional asset owners in Japan meant that the data was expanded for Japan which is the fastest growing regional market – followed by Australia and New Zealand.

The review found that the largest sustainable investment strategy globally is negative or exclusionary screening ($15.02 trillion), followed by environmental, social and governance (ESG) integration ($10.37 trillion) and corporate engagement/shareholder action ($8.37 trillion).

Global Sustainable Investment Alliance

Negative screening is the largest strategy in Europe, while ESG integration leads in the United States, Canada, Australia/New Zealand and Asia ex Japan, according to the GSIA. Japan’s primary sustainable investment strategy is corporate engagement and shareholder action the research found.

The GSIA reported that the fastest growing strategy, although also the smallest, was impact/community investing. Several GSIA members commented that the consideration of fiduciary duty was an important driver for sustainable investing, along with client demand.

While institutional investors still dominate the SRI market, with pension funds often comprising the largest percentage of institutional SRI assets, interest by retail investors is growing, according to the GSIA. The relative proportion of retail SRI investments in Canada, Europe and the United States increased from 13% in 2014 to 26% at the start of 2016 while over a third of SRI assets in the United States were retail, the GSIA said.

The GSIA also reported that growing global concern over climate change has resulted in rising interest in green finance, including climate-aligned bonds resulting in a reallocation of assets.

In 2016 in Canada and Europe, most SRI assets were in bonds (64%) followed by equities (33%), according to the GSIA. This compares with the figures in 2014 when 50% of assets were in equities and only 40% in bonds. The GSIA said that China is now the world’s largest issuer of climate-aligned bonds, with $220 billion in issuances according to the Climate Bonds Initiative.

Meanwhile the UK-based pressure group, ShareAction, has celebrated the success of investor engagement which has led to the world’s largest brewer,  Anheuser-Busch InBev announcing its commitment to purchase all of its energy from renewable sources by 2025.

AB InBev CEO Carlos Brito said: “Climate change has profound implications for our company and for the communities where we live and work,” said AB InBev CEO Carlos Brito. “Cutting back on fossil fuels is good for the environment and good for business, and we are committed to helping drive positive change. We have the opportunity to play a leading role in the battle against climate change by purchasing energy in a more sustainable way.”

ShareAction coordinates the RE100 investor group, a coalition of 34 institutional investors across eight countries managing over $1 trillion in assets, which is calling on companies to publicly pledge to switch to 100% renewable electricity in their international operations.

Eoin Fahy, Head of Responsible Investing at KBI Global Investor said: “In the current political climate, with commitments to mitigate climate change under threat, it is even more important than ever that investors work together to encourage appropriate policy changes in the companies in which they invest. In joining the RE100 initiative companies such as Anheuser-Busch InBev are pressing ahead with real and substantive changes to the way they do business. This is clearly in the best interests of the environment and society at large, and – importantly – AB InBev’s shareholders too.”

What do you think?