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

Four-line chart showing rent growth in various sectors of real estate. Chart subtitle: Industrial and multifamily rent growth has outpaced inflation; retail and office have not kept up with increasing replacement, capex, and maintenance costs. Chart visual description: Y-axis shows Real Rent Growth, ranging from -15% to +10%. X-axis shows years from 2001 to 2022. MultiFamily line is green, Industrial line is brown, Office line is blue, and Retail line is slate. Chart data description: Since 2020, both office and retail have declined, though both experienced a slight period of growth in 2021. MultiFamily declined during the 2020 downturn, increased to a peak in 2021, but has decreased this year. Industrial has held relatively stable and though it declined in the pandemic, has nearly recovered. Chart sources: CoStar, JP Morgan Chase Research as of June 30, 2022. Real rent growth is defined as the year-over-year change in property rents less inflation.


To Inflation and Beyond

Real estate as an asset class is not immune to the effects of inflation and rising rates, but certain sectors…

Combination column and line chart showing U.S. GDP Growth, year over year, and Personal Consumer Expenditures (PCE) contribution to GDP. Chart subtitle: In only the mildest recession over the last 50 years did PCE not turn negative. Chart visual description: Y-axis spans percentages from -15% to +15%. X-axis shows dates from 1Q1970 to 1Q2021, though data is through 2Q2022. Recessionary periods are shaded in light grey, with 8 marked in the time period shown. Green columns display Real GDP YoY. Teal line displays PCE Contribution to GDP. A note on the chart notes that data during 2020 exceeds the bounds of the chart area, as the PCE line went negative to -24.1% in 2Q20, and positive to +25.5% in 3Q20. Chart data description: As explained in the text, one common definition of a recession is at least two consecutive quarters of negative GDP growth, and the GDP columns coincide with each recessionary period, going negative a two quarters before a recession, then going positive, then fully falling within the recession shading. The first two quarters of 2022 both had negative GDP YoY. The PCE line also corresponds to the text’s explanation. Though the recent quarters have seen a slight decrease, PCE is still positive as of now. Historically, however, it has turned negative preceding recessions, except for 1991’s. Chart Source: U.S. Bureau of Economic Analysis as of June 30, 2022.


Recession Redefined

The National Bureau of Economic Research (NBER) is widely considered the official judge on what is and is not a…


The Currency Conundrum

The U.S. dollar is the strongest it has been in a generation. The U.S. dollar index is up almost 11%…


Halftime Market Outlook: A Mixed Bag

Last week, we hosted our “Halftime” Market Insights Webinar. As the host, my job was to introduce…


2022 Halftime Market Insights Video

This video is a recording of a live webinar held July 20th by Marquette’s research team, featuring in-depth analysis of…

2-line chart showing Crude Price and 3:2:1 Crack Spread. Chart subtitle: Record high crack spreads on top of higher crude prices are behind $5 gasoline. Chart visual description: Left Y-axis is labeled "Crude $/bbl" and ranges from $0 to $160. X-axis shows dates from July 1992 to April 2021, though data is through June 2022, and is shown in 15-month increments. Right Y-axis is labeled “3:2:1 Crack Spread $/bbl” and spans $0 to $60. First line is purple and represents WTI Crude Oil. Second line is tan and represents 3:2:1 Crack Spread. Chart data description: WTI Crude Oil line starts at $21 at far left, with a few peaks and valleys in the years since 1992. The peak, in June 2008, hit $140, with the next highest peak beyond 2008 in May of 2022, at $114. June 2022 price was $105. Crack Spread Line is more volatile over time, with July 1992 data at $2.65. Peak was in June 2022, at $47.65, with April and May closely following. Prior peak was in August 2005 at $46.62. Chart source: Bloomberg. End chart description.


Oil Prices Aren’t All They’re Cracked Up to Be

Americans are paying more at the pump this summer than they ever have in the past. The national average in…

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 >