Socially Responsible Investments (SRI), those that pay attention to the environmental and social impacts of what they fund while still turning a profit, have ballooned. The Forum for Sustainable and Responsible Investment, an association for professionals and organizations engaged in sustainable, responsible, and impact investing, recently released a report detailing the growth of SRI in the United States, showing huge increases in funding.
Coming in at over $6.5 trillion in 2014, the Socially Responsible Investments market in the United States has shown a 76 percent increase since 2012 and has grown nearly tenfold from 1995. “These assets account for more than one out of every six dollars under professional management in the United States,” the report states. The dollar amount is over 200 times larger than the annual flow of Official Development Assistance from the United States.
The growth in SRI is not limited to the United States. The Global Sustainable Investment Alliance, a worldwide collaboration of sustainable investment organizations takes a broader view, looking at the amount of money invested in SRI around the world by region.
In 2014, $21.4 trillion was tied up in SRI around the globe, an increase of $8.1 trillion from two years previously. Europe leads the pack, with 63.7 percent of the total, more than doubling the amount held by the United States. Canada contributes 4.4 of the share, an impressive number considering its relatively small population. In fact, per capita SRI in Canada is higher than the United States. These three regions contribute 99 percent of the total, with Asia and Australia/New Zealand taking .2 and .8 percent respectively.
Europe also has the highest proportion of SRI to total managed assets, with 58.8 percent of all investments channeled towards socially beneficial growth. The global average is just over 30 percent and has grown nearly 50 percent in the last two years.
To be sure, foreign investment by governments to aid developing nations must also be strong. “The global challenges are so complex and the size of the funding that’s needed is so large, traditional funding sources like philanthropy are probably not going to be sufficient to meet it,” said Anna Kearney, associate director for corporate social responsibility at the Bank of New York Mellon (BNY Mellon), in July.
In addition, the issue of how much of SRI ends up aiding environmental and social development in the developing world is unclear.
However, the Global Impact Investing Network — a nonprofit working to scale up impact investing — sheds some light on the answer. The group surveyed 146 SRI firms around the globe and found that 48 percent of the $60 billion under management by these firms was invested in emerging markets. That may be a proxy for the ratio of the $21.4 trillion in SRI that is invested in developing economies.
The trajectory for SRI remains promising. As more consumers look to put their money toward helping the planet and the poor while earning a profit, a growth in investment options that offer this will follow.
– John Wachter
Sources: Forum for Sustainable and Responsible Investment 1, Forum for Sustainable and Responsible Investment 2, Global Impact Investing Network, Global Sustainable Investment Alliance, The Guardian, Organization for Economic Cooperation and Development