In a research article published today by Sustainable Research and Analysis, a decade of sustainable investing developments as seen through the prism of mutual funds and ETFs is portrayed in the form of ten charts and commentary.

The total net assets of mutual funds and exchange traded funds (ETFs) linked to sustainable investing expanded dramatically in the last decade, adding almost $1.5 trillion in the last ten years.  Assets increased from $113.5 billion at the start of the decade to reach $1.6 trillion by YE 2019, fueled largely by fund re-brandings, followed, to a much lesser extent, by market movement and net new money.

The number of firms offering sustainable fund products, fund offerings and types as well as investors also increased dramatically.  In the process, investors and the allocation of sustainable assets across fund types and sectors shifted dramatically as did the dominant form of strategies pursued by leading investment management groups and their fund offerings.  While the definition of sustainable investing continues to evolve, this refers to a range of overarching investing approaches or strategies that encompass values-based investing, negative screening (exclusions), thematic and impact investing, ESG integration, engagement and proxy voting.  These are not mutually exclusive.

Assets expanded modestly during the first half of the decade, but gained significant traction starting in 2016.  In the last five years, assets added $1.4 trillion or 95% of the decade’s total. It’s not coincidental that this interval followed the signing of the Paris Climate Agreement of 2015 (COP 21).  But in addition to heightened sensitivity to climate change and the risks and opportunities associated with this universal threat, other factors also influenced the growth and changed the sector in a way that’s portrayed via the following ten observations:

  • Mutual Funds and ETFs reached $1.6 trillion in assets
  • Mutual funds continue to dominate with 98% of assets
  • Growth is almost entirely attributable to fund re-brandings in the last 2 years
  • Fund groups increased from 59 to 165 firms
  • Fund type/sector allocation now more closely aligned with conventional funds
  • Institutional investors account for at least 56% of assets
  • Sustainable index funds make up only 2.6% of assets
  • Eight green bond funds end 2019 with record $590.6 million in assets
  • Largest 10 funds shifted from negative screening to ESG integration
  • Dominant sustainable investing strategy across largest firms at YE 2019: ESG integration

The complete article is available at: https://www.sustainableinvest.com/a-decade-of-sustainable-investing-10-years-10-charts/