According to the Global Sustainable Investments Alliance (GSIA), sustainable investments accounted for 35.9% of total assets under management at the start of 2020 across the U.S., Canada, Japan, Australasia, and Europe, compared to 33.4% in 2018, Corporate Secretary reported.
“This report shows that beyond the top line growth in sustainable investment assets, this is an industry that is in transition, with rapid developments across regions that are reshaping sustainable investment to increasingly focus on moving the industry towards best standards of practice. Increasingly, there are expectations that sustainable investment is defined not just by the strategies involved, but by the short- and long-term impacts that investors are having from their sustainable investment approach,” according to the Global Sustainable Investments Alliance.
Based on the dollar value of investments, sustainable investing at the start of 2020 was at $35.3 trillion, or 15% higher compared to the previous two years.
“The report again demonstrates that sustainable investment is a major force shaping global capital markets and, in turn, is influencing companies and others seeking to raise capital in those global markets,” adds the Global Sustainable Investments Alliance.
GSIA utilizes an “inclusive definition of sustainable investing” for the report, which covers strategies like environmental, social, and governance integration, norms-based screening, best-in-class screening, and impact investing.
Among the quickest adopters of sustainable investment assets, the research finds that Canada experienced the strongest growth in sustainable investment demand. Between 2018 and 2020, the ratio of sustainable investments compared to all assets expanded to 61.8% from 50.6%.
In comparison, Europe saw its proportion of sustainable investments decline to 41.6% in 2020 from 48.8% in 2018. However, the drop in assets may be attributed to the more strict guidelines for investments to claim they are sustainable, as European regulatory bodies have tightened regulation to help diminish cases of so-called greenwashing, or fund strategies that only appeared to be green in name only.
“In Europe, this was driven in large part by a strong legislative push that now explicitly sets out sustainability standards for sustainable finance products,” according to GSIA, which also caution against making year-on-year comparisons in regions where sustainability definitions have significantly changed.