INTRODUCTION
In recent years, sustainable investing has moved to the forefront of the global agenda. This shift has been spurred by two global events. The first is the Paris Agreement, which was launched at COP 21 in 2015, and ratified at COP 22 in November 2016. The Paris Agreement’s aim is to keep global temperatures from rising above 2 degrees Celsius, as a way to combat climate change and preserve the Earth’s current state. The second (somewhat simultaneous event) was the creation of the U.N. Sustainable Development Goals, which were launched in January 2016 and consist of 17 different goals in which “countries will mobilize efforts to end all forms of poverty, fight inequalities, and tackle climate change.” These increases in interest in environmental, social, and governance are well- timed, given that the World Meteorological Organization (WMO) recently found that “concentration of CO2 in the Earth’s atmosphere reached record highs in 2016.1
SUSTAINABLE INVESTING’S SHIFT TO THE MAINSTREAM
Beyond government and policy actions, there has also been a financial shift toward sustainable investing. The Global Sustainable Investment Alliance found that between 2014 and 2016, socially responsible investment (SRI) assets grew by 25% in Asia, Australia, U.S., and Europe. Japan led the way, with a growth of more than 6,600% over the two-year period, while Europe experienced the lowest growth, of only 12%.2 This may not be so surprising, given that Europe already had close to USD 11 trillion in SRI assets in 2014.
The spread of sustainable investment into the mainstream has been largely led by asset owners. Only 20% of institutional investors in North America and Asia do not include sustainable investments in their process. In Europe, only 10% neglect to incorporate ESG.3
In addition to asset owners, market participants have continued to show a passion for the market. Schroder’s 2017 global investor study focused on sustainable investing found that millennials were more likely to invest in sustainable funds than older generations—implying that this trend may be here to stay. The survey also found that 78% of people value sustainable investing more today than they did five years ago.4
This movement toward the mainstream has also been recognized by S&P Dow Jones Indices, which now publishes carbon metrics on its website, along with typical financial metrics like market capitalization.
