Sustainable Investing Among Equity Asset Classes

March 04, 2021 | ,

Bar chart showing dedicated and integrated ESG strategies across various equity asset classes. Chart subtitle: Dedicated vs. integrated sustainable investing strategies among equity classes. Chart description: Y-axis shows categories U.S. Large-Cap, U.S. Mid-Cap, U.S. Small-Cap, International Large-Cap, International Small-Cap, and Emerging Markets. X-axis shows proportion of equity universe that is ESG dedicated or ESG integrated ranging from 0-40%. U.S. Small-Cap is the smallest in both categories (1.7% dedicated; 18.0% integrated) and Emerging Markets is highest (8.6% dedicated; 35.6% integrated). Chart source: eVestment. Please reference disclosure for universe data.

Sustainable investing continues to grow in both size and relevance among institutional investors and asset managers. As a matter of background, sustainable investing is a term that encompasses three broad approaches: ESG Integration, Socially Responsible Investing, and Impact Investing. As elaborated on in Marquette’s Sustainable Investing video series, the definitions of each of these terms are:

  • ESG Integration: Returns-focused investing that incorporates long-term sustainability factors (Environmental, Social, Governance) into the investment process.
  • Socially Responsible Investing (SRI): Investments driven first by ethical values.
  • Impact Investing: Investments with the specific intent to create and measure social and/or environmental impacts alongside financial returns.

While SRI and Impact Investing are more targeted strategies driven by underlying initiatives and/or beliefs, ESG integration has allowed portfolio management teams of more traditional approaches to consider social and environmental issues in a more tangible way than in the past. As ESG factors are more ingrained in the investment processes, there will be more investment options that contribute, directly or indirectly, to some of the ideals sought after in SRI and Impact portfolios. As shown in the above chart, investors have options across the global equity universe for both ESG integrated funds as well as dedicated SRI/Impact Investing funds. The proportions of each are likely to expand as sustainability investing trends accelerate globally.

Along with this growth comes an increased emphasis on measurable impact and standardized reporting, both of which have been a challenge in the sustainable investing space. We have started to see investment managers adopt the United Nations Sustainable Development Goals (UN SDGs) as a framework for expressing the sustainable intent or reach of their portfolio. For instance, there is a growing contingent of investment managers that have mapped their portfolio holdings to one or more SDGs based on whether the firm’s product or service aided or harmed the stated end goal. We have also seen many investment managers become signatories of the UN Principles for Responsible Investment (PRI) over the last three years. The UN PRI are comprised of six foundational principles that work to support and encourage ESG investing. Another sustainable investing reporting metric that has become more readily available is carbon intensity measures. While there have been many positive developments in recent years, investors should be cognizant of potential greenwashing — disingenuous or misleading attempts to present strategies as more ESG-focused than they actually are.

Overall, sustainable investing is moving in the right direction as more allocators and investment managers realize that returns need not be sacrificed in pursuit of positive change. In fact, a fundamental concept of sustainable investing is that firms with better ESG practices tend to fare better over the long run due to a reduced likelihood of litigation, increased diversity, and capitalization on emerging sustainable technologies, among others. Marquette continues to monitor these developments and stands ready to assist clients in pursuing their sustainable investing goals.

Print PDF > Sustainable Investing Among Equity Asset Classes

eVestment Universes
U.S. Large-Cap: “US Large Cap Equity” 1,129 Products
U.S. Mid-Cap: “US Mid Cap Equity” 289 Products
U.S. Small-Cap: “US Small Cap Equity” 640 Products
International Large-Cap: “EAFE Large Cap Equity” 219 Products & “ACWI ex-US Large Cap Equity” 142 Products
International Small Cap: “EAFE Small Cap Equity” 101 Products & “ACWI ex-US Small Cap Equity” 67 Products
Emerging Markets: “All Emerging Markets Equity” 654 Products


The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Related Content


Private Credit: Consistency is Key

We are all familiar with adages like “consistency is the key to success” and “excellence is mundane”. For private credit,…


Taking the PEPP Out of the Eurozone’s Recovery?

Amid concerns over the Delta variant and signs of a sharp slowdown in the global economic rebound, many central banks…


The Turn of the SKEW

Domestic stock indices have rebounded from pandemic-induced lows exhibited in the spring of 2020 with relative ease, and U.S. equity…

Two-line chart showing unemployment and job openings. Chart subtitle: The number of job openings in the U.S. now exceeds the number of people unemployed. Chart description: Y-axis shows number in millions, from 0 to 25. X-axis shows date from December 2000 to July 2021, labeled in increments of nine months. Blue line shows number of people unemployed. Orange line shows number of job openings, As described in the accompanying text, in recent months, the number of job openings has exceeded the number of unemployed people. Chart source: Bloomberg.


What Does the Labor Shortage Mean for Inflation?

Employers have faced a number of challenges throughout the COVID-19 pandemic — most recently, a labor shortage. As of the…


China: From Leader to Laggard

In 2020, China was a top performer in the global equity market, returning 29.5%. In 2021, however, Chinese equities have…

Three-line chart showing Consumer Price Index year-over-year growth (representing actual inflation) and 2- and 5-year breakeven inflation rate (measuring difference in yield between U.S. Treasury bonds and TIPS of the same maturity). Chart subtitle: CPI and breakeven inflation rate data can help shape future inflation expectations Chart description: Y-axis shows range of percentages from -6% to +6%. X-axis shows years from 2004 to present (though labeled by year, so final label is 2020). Headline CPI Y/Y is green line; 2-Year Breakeven is purple; 5-Year Breakeven is teal. Labels on chart highlight that Y/Y headline CPI peaked twice after 2008's financial crisis. In 2011, the 5-year breakeven fell below 2-year breakeven as leading indicator of CPI declining and normalizing a year later. Most recently, Y/Y headline CPI running hot again but potentially plateauing and the 5-year breakeven is already below the 2-year breakeven and both potentially plateauing. Chart sources: Marquette Research, Bloomberg; latest available as of August 13, 2021.


Where is Inflation Headed?

Despite a number of commodity prices, including lumber, corn, and pork, retreating from recent highs, inflation remains a key focus…

More articles

Subscribe to Research Email Alerts

Research Email Alert Subscription

Research alerts keep you updated on our latest research publications. Simply enter your contact information, choose the research alerts you would like to receive and click Subscribe. Alerts will be sent as research is published.

We respect your privacy. We will never share or sell your information.

Thank You

We appreciate your interest in Marquette Associates.

If you have questions or need further information, please contact us directly and we will respond to your inquiry within 24 hours.

Contact Us >