Canada and the US are leading the way in the global growth of sustainable investment, research by GSI Alliance has found.
Global sustainable investment reached $35.5 trillion across five major markets at the start of 2021, according to the Global Sustainable Investment Review 2020. This marked a 15% increase over the past two years.
The review, which surveys the state of sustainable and responsible investment of major financial markets globally, found that, although sustainable investing was playing out differently in different regions, growth was apparent in most areas.
Canada led the way with a growth of 48% in sustainable assets, followed by the US at 42%, and Japan at 34% growth.
As a result, the Canadian market now has the highest proportion of sustainable investment assets at 62%. The US and Europe combined continue to represent more than 80% of sustainable investment assets globally.
The GSA Alliance report stated: “This is an industry that is in transition, with rapid developments across regions that are reshaping sustainable investment to increasingly focus on moving the industry towards best standards of practice.”
It also highlighted the most common sustainable investment strategy as being ESG integration – the adoption of ESG-themed analysis throughout the investment process. This was followed by “negative screening” – the omission of unwanted companies or industries such as weapons manufacturers or oil producers – and corporate engagement and shareholder action.
However, the report contended that sustainable investment was no longer just defined by the strategies, but also by the impact of the investment approach over the short and long term.
Australasia and Europe reported a decline in growth when compared with previous years, the former being due to the introduction of new industry standards. The European Union’s Sustainable Finance Disclosure Regulation has raised the bar for ESG investing and requires investment roducts to be categorized according to the level of ESG integration.