Global sustainable investment grows 15%: GSIA

Australia and New Zealand have the third highest proportion of sustainable investments in the world, with more than a third of AUM sustainably managed.

The biennial Global Sustainable Investment Review, released today by the Global Sustainable Investment Alliance (GSIA) has revealed that the global sustainable investment industry has grown to US$35.3 trillion.

Canada has the highest proportion of sustainably managed funds at 62% of total AUM, followed by Europe, on 42%, Australasia at 38%, the United States at 33% and Japan  on 24%.

The report shows the continuing prevalence of sustainable investing across the global investment industry, with sustainable assets under management growing 15% in two years to US$35.3 trillion, and in total equating to 36% of all professionally managed assets across regions covered in the report.

In Australasia sustainable investment assets grew 25% between 2018 and 2020. Yet compared to some other regions, growth was slowed by tightening industry standards such as the Responsible Investment Association Australasia's (RIAA's) Responsible Investment Standard.

"What was really important to us this year, as part of the regional membership base, is pushing for better practice in responsible investment and a style of responsible investment that actually delivers sustainability outcomes," said GSIA chair and CEO of the Responsible Investment Association Australasia Simon O'Connor.

"We're a long way from achieving net zero, delivering the SDGs and so it's really to tie that together so that the whole market starts focusing on the deliverability of the big sustainability goals while promoting a style of responsible investment that aligns with sustainability outcomes effectively, while recognising that there are different levels of maturity in markets, and different levels of progress in different markest."

The report found that the most common sustainable investment strategy is ESG integration, followed by negative screening, corporate engagement and shareholder action, norms-based screening and sustainability-themed investment.

Australia's growth comes in the backdrop of uncertain federal policy regarding climate change and sustainable investment.

"Australia is really unique because we've been at this a long time, and although we have strong regulators focus on this area, our federal legislators are absent from the conversation and probably are trying to thwart progress in this area, which really stands out as an outlier when you look at what the rest of the world," O'Connor said.

There is both a global and local focus on stamping out greenwashing, which O'Connor welcomed.

"Firstly, it shouldn't surprise anyone that our regulators are going to step up because they're members of the peak bodies that commit to the work of IOSCO, which includes a review of greenwashing," O'Connor said. "This is an investor beware and pay attention move. Our regulators are really staying right on top of global developments and are doing the work that needs to be done in the market.

"We're moving reasonably well on that side, and have strong and consistent signals form the regulators, but when you look at international peers, there will be more to come. We're not done yet."

O'Connor pointed to the relative shifts in impact investing, which lost total assets under management in the last two years, and sustainable investing, which gained in the last two years as examples of how definitions are shifting and strategies are evolving.

"I think a lot of different markets are bedding down what falls under what category, and I think what I took from that, there's a big step up in sustainability themed investing by nearly a trillion dollars, which I think more than accounts for the reduction in impact investing," he said. "That end of the market continues to be a small but fast moving and fast evolving end of the market."

The  GSIA is an international body made up of regional responsible investment industry bodies including RIAA. Data for the report is collated from the US SIF: The Forum for Sustainable and Responsible Investment (US SIF), Japan Sustainable Investment Forum (JSIF), the Responsible Investment Association Canada (RIA Canada) and RIAA, and in the case of Europe (including UK), from secondary industry data.

Read more: RIAAUS SIFSimon O'ConnorJapan Sustainable Investment ForumGlobal Sustainable Investment AllianceGlobal Sustainable Investment Review