The ESG investment universe has been transformed over the past five years – and it will only continue to evolve.
Climate change is a key concern for many investors and is likely to remain so for the foreseeable future as international efforts to reduce carbon emissions gather momentum and pressure grows on capital allocators to direct investment to renewable energy sources.
However, the scope of responsible investment goes far beyond this. Investors are concerned about – and keen to have a positive influence on – anti-corruption efforts, cybersecurity, and water and supply-chain issues, among many other factors.
In areas such as diversity and inclusion, investors are still working to understand how this complex and wide-reaching issue affects their investment portfolios and service providers.
Investors show no sign of slowing their allocations to ESG. According to Morningstar, global ESG assets grew to $2.74 trillion as of December 2021. Year-on-year, the global sustainable fund universe expanded by 53%, far exceeding the annual totals from the previous two years.50 By 2025, global ESG assets are forecast to hit more than $53 trillion – more than a third of total global assets, according to analysis by Bloomberg Intelligence.51
It is also clear that an increasing number of investors want to have a tangible and quantifiable positive impact with their investments, on top of the potential financial risk and return benefits their allocations may bring. Impact-focused investment strategies are proliferating amid spiking demand from both investors and international movements such as the UN Sustainable Development Goals.
This reflects the findings of five years of RBC GAM’s Responsible Investment Survey. Institutional investors are rapidly innovating and growing more sophisticated in their approaches to responsible investment.
In the years ahead, regulatory systems will continue to develop their ESG approaches and definitions. As they do, companies will continue to adapt to the ESG data standards required of them. For institutional investors, this in turn improves investors’ ability to analyze, understand, and compare the ESG characteristics of their investments and portfolios.
The future of responsible investment is bright, but there is much work yet to do to cement its place in the investment world’s ‘business as usual’ operations.
For more information on RBC Global Asset Management and our approach to responsible investment, click here.