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ESG Update: Continued Growth in Supply and Demand

March 31, 2017

This week’s Chart of the Week is an excerpt from our recently released white paper, Bracing for Impact: How to Prepare for the Next Generation of Defined Contribution Plans.

Both the demand for and supply of ESG investment opportunities have surged over the past several years. This week’s chart depicts the rise in institutional ESG assets. The value of sustainable, responsible and impact investing assets in the United States rose by an unprecedented 116% between 2012 and 2016 according to the Forum of Sustainable and Responsible Investment.

From the demand side, signatories to the Principles for Responsible Investment, a set of investment principles that enable incorporation of ESG considerations into investment practices, grew in combined assets from less than $6 trillion in 2006 to nearly $60 trillion by the end of April 2015. In response, the supply of ESG strategies in the market continues to increase as well, with investment firms offering ESG products in both the traditional and alternative asset classes.

Regulatory changes, new research, and shifting investor demographics have fostered increased interest in ESG investing, and plan sponsors should be prepared to adapt their investment options to accommodate the changing landscape.

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