Topic Tags: Sustainable Investing

ESG Update: Continued Growth in Supply and Demand

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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Bracing for Impact: How to Prepare for the Next Generation of Defined Contribution Plans

As defined benefit plans continue to grapple with funding issues, defined contribution plans have emerged as the primary vehicle for retirement savings. In recent years we have seen increased adoption of features that encourage participation in such plans, such as automatic enrollment, as well as the emergence of options that better prepare participants for retirement, such as target date funds. Consideration of ESG issues — that’s environmental, social, and governance — within the participant-directed, defined contribution plan structure has also gained momentum as a way for plan sponsors to engage with their participants and mitigate risks for the investor. Plan sponsors are now tasked with the challenge of determining whether and how to best incorporate ESG considerations into the stewardship of defined contribution plans.

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China Commits to Financing a Green(er) Economy

Earlier this month China and the United States jointly pledged to ratify the Paris climate change agreement, a monumental step for the world’s two largest polluting economies. Executing a dramatic reduction in greenhouse gas (GHG) emissions will require creative financing, and China is looking towards green bonds to support their commitment.

Earlier this month China and the United States jointly pledged to ratify the Paris climate change agreement, a monumental step for the world’s two largest polluting economies. Executing a dramatic reduction in greenhouse gas (GHG) emissions will require creative financing, and China is looking towards green bonds to support their commitment.

Green bonds are financial instruments that raise capital for specific projects with targeted environmental benefits. Apple made headlines in February of this year by issuing the largest green bond from a U.S. corporation. The tech giant sold $1.5 billion in green bonds earmarked for clean energy projects, green buildings, and resource conservation efforts.

Despite the large issuance from Apple, China has surpassed the United States as the largest issuer of green bonds. The country seeks to attract global investors to help finance the Chinese economy’s transition away from polluting industries and towards advanced technology and services.

China approved more than $17.4 billion of sales of green bonds so far this year — over 40% of the market — after issuing its first green bond less than two years ago. However, some of the domestic green bonds being issued do not meet international standards and require additional scrutiny by prospective investors.

For example, some of the Chinese green bonds are tagged to fund clean coal projects. While clean coal might represent environmental progress in pollution-afflicted China, internationally these bonds conflict with the majority of environmentally-friendly investment mandates, as well as the Green Bond Principles, which serve as the gold standard in green bonds.

China is currently responsible for over 20% of GHG emissions, closely trailed by the United States at just under 18%. As both countries seek financial support for their climate change commitments, investors must be wary of products that aren’t as green as they seem.

Responsible Investing for Social Impact

Impact investing is one of the fastest growing spaces in the investment marketplace — offering market-rate returns alongside social and environmental benefits.

Please join us for a discussion on creating social impact through responsible investing with members of our impact investing group. Key topics from our recently published newsletter will be covered.

Attendees will be briefed on:

  • The history of socially responsible investing (SRI)
  • Different approaches to responsible investing
  • Impact investing program implementation
  • First steps for new impact investors

A question and answer session will follow.

Live Webinar – Tuesday, August 18, 2015 – 1:00-1:45 PM CT

Follow @MarquetteView for live webinar highlights
Questions taken via webinar or using hashtag #ImpactInvesting

Presenters: Nichole Roman-Bhatty, CIMA®, Managing Partner; David Hernandez, Senior Research Analyst; Courtney Hugger, Marketing Operations Manager

Who should attend: Institutional investment stewards, investment managers

Please contact us for access to this presentation.

Creating Social Impact Through Responsible Investing

August 2015 Investment Perspectives

A growing population of socially conscious investors has energized socially responsible investment (SRI) strategies in the past decade. The Forum for Sustainable and Responsible Investment defines SRI as the process of integrating personal values and societal concerns into investment decision making. SRI has increased in the U.S. from $639 million in 1995 to $6.6 trillion in 2014. These assets account for roughly 17% of total dollars under management in the U.S.

This newsletter outlines a brief history of SRI, approaches to implementing an SRI program including positive and negative screening and shareholder activism; impact investing; example products and solutions in equities, fixed income, and real estate; investor concerns around performance and fiduciary liability, and considerations for implementing a sustainable investing program.

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