“I think the growth that we’re seeing in the ESG space is happening independent of any political backdrop,” says Ingrid Dyott, portfolio manager for the $2.5 billion-AUM Neuberger Berman Socially Responsive Fund. “There’s interest that’s not going away.”
In the month following the 2016 U.S. presidential election, the Sierra Club reported that it had recruited 18,000 new members, smashing the previous one-month recruiting record of 1,200 new members.
While Trump’s agenda may ease corporate governance standards across several industries, a new generation of activist investors may stand in to hold them accountable.
“People are very passionate about the environment, about labor rights,” says Hardeep Walia, CEO of Motif Investing. “They want to vote, not just with their consumption dollars, but with their investment dollars, in favor of their causes.”
Where regulation might no longer be counted on to create progress towards environmentally and socially conscious businesses, investor activism may step in to pressure companies to adopt new policies and procedures.
Many participants in U.S. ESG funds live in Europe and Asia. Elsewhere in the developed world, environmental stewardship, corporate citizenship and responsive governance have become expectations, and a sizable portion of the U.S. investment universe is held by European, Canadian and East-Asian investors with a taste for sustainability.
“Over the past eight years, probably longer than that, the trend has been more people investing with the philosophy that they should support companies doing better for the environment or their communities,” says Zerilli. “I don’t know if this administration can change that, people have already been leaning towards this.”
The interest in sustainability and ESG investing has gone well beyond government halls and street protests. The private sector is embracing sustainability based on simple economics—it’s better to reduce waste and use fewer resources because it leads to lower overhead. A company with socially responsible policies and ethical corporate governance is less likely to be fined by a regulator or targeted with litigation, and happier workers tend to be more motivated and productive with lower absenteeism, says Anthony Eames, vice president and director of responsible investment strategy at Calvert Investments, a subsidiary of Eaton Vance.
In 2016, the Sustainability Accounting Standards Board released a report that 72 out of 79 of the U.S.’s industries, representing $27.5 trillion or 93 percent of the U.S. capital markets, are significantly affected in some way by climate risk.
According to a 2015 survey by the CFA institute, 73 percent of portfolio managers incorporate ESG factors into their investment decision-making, and with good reason, says Kenneth St. Amand, vice president and portfolio manager at Mirova, a subsidiary of Natixis Asset Management focused on socially responsible investing.