Environmental, Social and Governance considerations when looking at investments.
Sustainable investments have increased to 26 percent of professionally managed assets around the world.
More than a quarter of the $88 trillion assets under management globally are now invested according to environmental, social and governance principles known as ESG, a McKinsey & Co. study found.
Sustainable investing has become “a large and fast-growing major market segment,” with ESG being integrated into portfolios at a growth rate of 17 percent a year, McKinsey said in a report published October 26. Japan’s Government Pension Investment Fund, Norway’s Government Pension Fund Global, and Dutch retirement fund ABP are among the large institutional investors that practice sustainable investing, the firm said.
ESG accounted for $22.89 trillion, or 26 percent, of professionally managed assets in Asia, Australia, New Zealand, Canada, Europe and the U.S. at the start of 2016, according to the report. That compares with 21.5 percent in 2012.
More institutional investors than ever before “recognize environmental, social, and governance factors as drivers of value,” Sara Bernow, a McKinsey associate partner who co-authored the report, said in a statement on the findings.
Integrating ESG factors into the investment process is “critical to investing effectively,” Bernow said.
European investors lead in sustainable investing, with 52.6 percent of the region’s assets invested according to ESG factors at the beginning of 2016, the study found. Just over half of assets in Australia and New Zealand were invested in sustainable strategies, while 37.8 percent of Canadian investments followed ESG principles.