Sustainable assets under management rose 20 per cent during the two years to the end of 2022 to reach almost US$22 trillion but they also fell 14 per cent over the same period from US$35.3 trillion to land on US$30.3 trillion.
The dual data reflects a “material change in the US methodology and the quantum of assets represented by this region”, according to the Global Sustainable Investment Alliance (GSIA) annual report released last week.
In fact, US sustainable assets more than halved from about US$17 trillion in the 2020 GSIA survey to US$8.4 trillion at the latest count on the back of fund re-classifications, regulatory reporting changes and some real changes in manager holdings.
GSIA, the peak body for various regional or country responsible investment organisations, found that compared to the 2020 study several US fund managers reported substantially fewer sustainable assets under management to the tune of “billions and trillions of dollars” in some cases.
Canadian sustainable assets also slid a little over the two-year period from more than US$2.4 trillion to almost US$2.36 trillion, again mostly due to reporting methodology changes.
But the GSIA figures show Europe, Japan and Australasia continued on-trend with strong growth in sustainably managed funds across all three regions.
“The Australian & New Zealand market has grown on an absolute basis from USD906 billion in 2020 to USD1.22 trillion in 2022,” the report notes.
Following another data classification change in 2020, however, sustainable funds as a proportion of all assets under management in Australasia fell to 38 per cent from 63 per cent in the 2018 survey.
“… the 2022 [Australia and NZ] reporting period sees a moderate rebound with relative assets increasing to 43%,” the GSIA study says.
Similarly, Europe has seen a long-term decline in the proportionate market share of sustainable assets by about 5 per cent each year.
The 2022 report also modified how underlying sustainable strategy assets were counted, voidng direct nominal comparisons from the previous study.
“However, the trend and ranking of the strategies is in line with the experience of practitioners who indicated that investors are increasingly focused on engagement with the aim of influencing change both within the companies they own and in the real economy.”
Corporate engagement was the most popular sustainable investment style followed by ESG integration while screening (negative, positive and ‘norms-based’) continued to fall out of favour.
Simon O’Connor, outgoing chief of the Responsible Investment Association of Australasia, said in a release that the GSIA report “shows a clear story of a rapidly maturing industry”.
O’Connor said “it is simply not sufficient to say you are doing responsible and sustainable investment, without being able to clearly articulate the real impact you are having”.
The GSIA release says higher reporting standards, changing investor expectations and tighter regulations should bring more uniformity to the sector.
“A wider trend is also emerging globally highlighting the need for clearer definitions and a more shared understanding around what makes a sustainable asset ‘sustainable’.”