Climate change is gaining in importance among financial professionals using ESG strategies to make their investment decisions, according to US SIF, the Forum for Sustainable and Responsible Investments.
The organization recently tallied the assets invested by money managers and institutional investors using ESG guidelines, as well as those that filed shareholder resolutions about ESG issues, and found most assets were invested to fight climate change. US SIF published these findings in a recent study, called the “2022 Report On U.S. Sustainable Investing Trends,” and announced the results during a webinar last week.
Sustainable investing accounted for a total of $8.4 trillion in AUM as of the beginning of 2022, and both money managers and institutional investors are investing a total of $3 trillion to fight climate change in some form. The total for ESG-directed investing represents 13% of the total U.S. assets under professional management, US SIF said.
Money managers holding some $1.2 trillion said they were taking a divestment stance against fossil fuel investments, according to US SIF’s analysis. Managers with $1.8 trillion said they were avoiding military- and weapons-related investments. And managers with $1.7 trillion in assets said they were avoiding tobacco-related investments.
Institutional investors also placed a priority on avoiding investments in businesses in countries with high risks of conflict, the analysis showed.
The data was based on reports from 497 institutional investors and 349 money managers. The “Trends Report” is produced every other year and is in its 14th iteration.
Different issues topped the list of concerns of shareholders in the resolutions they filed this year. In addition to climate change, a leading ESG issue raised in shareholder proposals was on ensuring fair workplace practices, and particularly on ending de facto discrimination based on ethnicity and sex, the data showed.
In addition to the institutional investors and money managers, data also was gathered from 1,359 community investment institutions that reported applying ESG criteria to their investments. Assets under management for community investment institutions where ESG criteria was applied grew by 72% to $458 billion over the past two years and increased by more than 600% in the last decade, US SIF said.
“Money managers and institutional investors are using ESG criteria and shareholder engagement to address a plethora of issues, including climate change, conflict risk and anti-corruption as well as labor and equal employment opportunity, corporate political activity and human rights,” said Lisa Woll, the CEO of the US SIF Foundation, in a statement issued following the webinar. “We are confident there will be continued growth in the ESG issues that investors will consider in the future.”
“When responsible investors analyze a company’s fundamentals in conjunction with ESG criteria, it improves both investment and societal outcomes,” added Marian Macindoe, head of ESG stewardship at Parnassus Investments, in a statement.