The global sustainable investment market has grown substantially in both absolute and relative terms, according to The Global Sustainable Investment Review 2014, a report released by the Global Sustainable Investment Alliance (GSIA).
Global sustainable investing assets under management (AUM) rose 61%, from US$13.3 trillion at the start of 2012 to reach US$21.4 trillion at the start of 2014.
That’s 30% of the total of all professionally managed assets across the regions covered by the survey conducted by the 7 leading sustainable investment professional membership associations.
The survey results were announced last month by The Global Sustainable Investment Alliance, (GSIA) whose mission is to “deepen the impact and visibility of sustainable investment membership organizations at the global level. GSIA is based in Brussels.
Sustainable investing, also known as responsible investing is an investment approach that considers environmental, social and governance (ESG) factors in portfolio selection and management. The 2014 review, like its predecessor, measures sustainable investments in all asset classes, from public equities and fixed income to hedge funds, microfinance and impact investments.
The United States, Canada and the European Union accounted for 99% of the total sustainable investment assets under management – but there are notable differences in approaches to sustainable investing.
While sustainable investing is fast catching on in US capital markets (with $1 in $6 AUM identified in the latest survey by member organization US SIF), in Europe more than half of all professionally-managed AUM practice an ESG strategy. (Australia, USA and Canada shares of market range from 17% to 31%, says GSIA.)
Impact investment is practiced by a diverse range of organizations in Canada, says the report. Out of the total Canadian impact investment assets of $3.9 billion at the start of 2014, Québec’s “solidarity finance” sector comprises $1.1 billion, or 28 percent.
Development finance organizations, the next largest category, account for $893 million, or 23 percent. This category primarily consists of Québec venture capital institutions but also some self-described development finance funds. Credit unions are the third largest player, with assets totaling $653 million.
The vast majority of Canadian impact investments—94 percent—are made directly into companies, as opposed to indirect investments via funds.
Canadian impact investment capital is placed across numerous sectors. The top sector is the nonprofit/social enterprise sector, which receives 43 percent of all Canadian impact investment assets. This number is particularly large due to Québec’s robust and established social economy.
Québec’s solidarity finance sector is “made up of those institutions that invest exclusively in cooperatives, non-profit organizations and associations that have socioeconomic objectives.”
The second largest sector receiving impact investment capital is the Aboriginal business sector, receiving 15 percent of impact investment assets. Organizations allocating capital to this category include Aboriginal Financial Institutions, credit unions and development finance funds.
“Impact Investing” is becoming an important theme as part of the overall sustainable investing scene, in all markets studied, notes the report. (The group describes this as targeted investments, typically in private markets, aimed at solving social or environmental problems.)
“The Review demonstrates that sustainable investing is an increasingly common investment strategy worldwide,” said Lisa Woll, CEO of US SIF: The Forum for Sustainable and Responsible Investment.
“The global findings show that sustainable investment strategies are being applied across asset classes to promote corporate social responsibility, build long-term value for companies and their stakeholders, and foster businesses that will yield community and environmental benefits,.” She added.
About the Global Sustainable Investment Alliance
The Global Sustainable Investment Alliance is comprised of the seven largest sustainable investment membership organizations in the world. To learn more about the GSIA, visit here: www.gsi-alliance.org.