Variations of responsible investing, impact investing and sustainable investing have been on the rise in the last decade and have gained in global popularity. Worldwide, governments and investors alike are moving toward socially responsible investments:
- In 2007, the European Investment issued its first green bond, whose proceeds of approximately 600 million EUR were used to fund renewable energy and energy efficiency projects.
- In 2008, following suit, the World Bank issued its first green bond and, as of 2017, over $155 billion worth of public and corporate green bonds have been issued.
- In 2018, the Seychelles government issued the first blue bond whose $15 million worth of proceeds will fund marine protection and sustainable fisheries.
- In 2018, the $11.6 trillion of all professionally managed assets (approximately 25%) were under ESG strategies compared to $3 trillion in 2010 (HBR).
- Mutual funds and exchange-traded funds with a focus on sustainable investing raked in $20.6 billion of total new assets in 2019 (CNBC). This is approximately 4 times that of 2018, which raked in $5.5 billion of new assets.
The success of these financial instruments demonstrate the shifting mindset of investors. Investors are becoming more environmentally and socially aware, and can no longer ignore the consequences of their investment decisions. Climate change, plastic pollution, and clean water are becoming catastrophic issues that we can’t ignore. Both global awareness and increasing pressure from consumers are driving investments with stronger ESG criteria strategies.
The next step is to develop criteria for sustainable investments that are accepted worldwide. For institutional investors in 2020, the top criteria for what was deemed responsible investing was those investments that fall under 1) conflict risk and 2) climate change and reducing our global carbon footprint.
The size of the market for responsible investing may be hard to measure because we have yet to formally adopt a globally accepted set of criteria, but the trend is clear. Investments In environmentally and socially conscious companies are becoming more than just a trend, but rather the norm.