Sustainable investing grew 25 percent globally in the past two two years, according to the Global Sustainable Investment Review 2016 released Monday.
The Global Sustainable Investment Alliance, which compiles the review every two years, combines regional reports to produce a worldwide picture of the increases in sustainable investing. At the beginning of 2016, sustainable investment assets reached $22.89 trillion, a 25 percent increase from 2014.
Europe accounts for more than half of the sustainably invested assets at 53 percent, while the United States accounts for 38 percent. The remainder considered in the review comes from Canada, Australia, New Zealand, Japan, and Asia excluding Japan.
The largest sustainable investment strategy globally is negative or exclusionary screening, which affects $15.02 trillion in assets. That's followed by pro-active environmental, social and governance investing ($10.37 trillion in assets) and corporate engagement or shareholder action ($8.37 trillion). There is some overlap among the strategies, which is why it adds up to more than the $22 trillion total.
Concern about climate change continues to be a main driver for impact investing, including growing interest in climate aligned bonds, according to the alliance. The growing interest in green bonds between 2014 and 2016 has shifted the average SRI asset allocation from mostly equities to mostly bonds.
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. The relative proportion of retail SRI investments in Canada, Europe and the United States increased from 13 percent of sustainably invested assets to 26 percent at the start of 2016.
China is another important contributor to the rise in green bonds as China is now the world’s largest issuer of climate-aligned bonds, with $220 billion in issuances, the review says.
Several other factors also are adding to the increase in sustainable investing. For instance, in Ontario, Canada, pension plans now have to report what portion of their investments take sustainability into account. Also, listed companies on the Australia stock exchange have to report sustainability risks for material acquisition, and New Zealand may follow suit.