GLOBAL – At least $13.6trn (€10.1trn) of professionally managed assets globally incorporate environmental, social and governance (ESG) concerns into their investment selection and management, according to a report by the newly launched Global Sustainable Investment Alliance (GSIA).
The study shows that Europe is the largest region, with about 65% of the known global sustainable investing assets under management.
Together with Canada and the US, it accounts for 96% of ESG assets.
The report also found that, with $8.3trn in assets, the most common ESG strategy used globally is negative/exclusionary screening.
Norms-based screening is also significant at $3trn, but this approach is currently only found on a large scale in Europe.
Positive/best-in-class screening stands at just over $1trn, with the US market contributing most of the global assets invested in positive screening.
Assets utilising ESG integration are at $6.2trn.
Approaches to corporate engagement/shareholder action varies greatly across regions, but this is the third-most common strategy with $4.7trn.
Impact investing and sustainability themed investments are comparatively small at $89bn and $83bn, respectively.
The Global Sustainable Investment Review 2012 is a collaboration between the Global Sustainable Investment Alliance, AfricaSIF.org and SIF-Japan.
It is the first report to collate results from market studies by regional sustainable investment forums from Europe, the US, Canada, Australia, Asia, Japan and Africa.
In other news, the fourth annual Forest Footprint Disclosure (FFD) report has revealed that the gap between the leaders of the forest risk commodity sectors and their peers is ever growing, as 100 companies have voluntarily disclosed their forest footprint, an increase of almost 15% compared with last year.
FFD welcomed the increase in discloser numbers, especially the first reports from multinationals such as Colgate-Palmolive, Groupe Danone, Gucci and HJ Heinz Company, as well as the widening geographic reach to Mexico and Japan.
However, an average of 16% difference in scores between leaders and runners up across all sectors highlights that there is still much work to be done, and many companies are trailing behind.
Two sectors – utilities and industrials, construction and autos – had significant variances and came in for particular criticism, as active corporate social responsibility in procurement appears not to be the norm.
Each year, FFD asks the world's largest companies to disclose their impact on forests based on their use of five commodities – soy, palm oil, timber and pulp, cattle products and biofuels.
Companies are categorised into 12 sectors, and leaders are identified.
Meanwhile, regulators and intermediary relationships are key to changing behaviours in financial services, according to John Kay, economist, author and chair of the review of UK equity markets and long-term decision-making, and changing behaviour is the only way to restore trust and confidence in the financial services sector.
Speaking at Tomorrow's Company's finance lecture on 'Building trust and confidence by changing behaviours in financial services' last week, Kay said: "The principle long-term cause of the lack of trust and confidence in the financial sector has been the systematic replacement of a culture based around relationships by a culture based on transactions and trade, […] and the extraordinary growth of trading that has taken place around that."
Kay pointed out that, today, lending to business accounts for less than 3% of the assets of UK banks, while the volume in foreign exchange trading makes up 70-80 times the volume of global-traded goods and services.
He blamed the globalisation and specifically the "Americanisation" of the financial services industry, regulatory arbitrage and the formation of large financial conglomerates for the explosion in trading relationships and activity.
"Equity markets are not a source of fresh capital," he added. "Equity markets over the last decade have also generated poorer returns to savers.
"The indices have offered rather disappointing returns, and the returns savers earned from them are rather worse than that, and yet financial mediation has never enjoyed a more profitable decade than the last 10 years."
Kay said this type of situation was unsustainable, economically and politically.
He added that trust between savers and intermediaries, as well as between the invested companies and intermediaries, was unlikely to be achieved by the current structure of intermediation, which involved a very long chain of intermediaries.