The sustainable investing glass may be one-quarter full – or more than three-quarters empty.
Last month’s report from the U.S. Forum for Sustainable and Responsible Investment, or US SIF, generated headlines for its finding that $12 trillion in assets now use one or more sustainable investing strategy. That represents more than one-quarter of the $46.6 trillion in professionally managed assets in the U.S., a 38% increase in the past two years.
There may be less than meets the eye in such large-sounding numbers, however, suggest the roundtable regulars on ImpactAlpha’s Returns on Investment podcast.
“It tells you there is an increasing awareness of these issues by a whole group of investors,” says Imogen Rose-Smith, an investment fellow with the University of California. “But It doesn’t necessarily tell you that all these investors are considering these factors as germane and central to their investment processes.”
Take climate change, the most commonly cited environmental factor considered by such sustainable investors, according to US SIF. Climate concerns were considered by money managers managing $3 trillion in assets.
“At this late date? Only $3 trillion in assets being assessed against climate-change risks?” asks ImpactAlpha’s David Bank. “The next stage of this discussion is…are you looking at the long-term risks facing your portfolio and shifting your portfolio?”
Still, the roundtable found reasons for optimism. Rose-Smith cites increased shareholder engagement and proxy voting on issues including climate change, gender diversity, executive pay and corporate governance itself. “That is a lot more powerful and is going to be a lot more influential to corporations than the top-level numbers,” she says.
And investors, individual and institutional, are becoming better educated about what’s in their portfolios, and their impact.
“There is a process here of transparency, accountability and feedback loops to the asset owners, and then the slow gears of change grinding along,” Bank says. “Whether that process of change is happening fast enough is another discussion” – and another podcast.