7/02/2016, Martina Macpherson

Sustainable investment definitions

(Socially) responsible (SRI), sustainable, ‘green’ or ethical investing all possess the same fundamental investment ‘values’: to achieve both a financial return and social good.

For long-term investors such as asset owners, the evidence increasingly shows merit in sustainable investment approaches practiced within the context of fiduciary duty.[1] These investors, and in particular faith-based investors, aim to reflect their values within their investment strategy.

By doing so, they aim to avoid controversial business areas such as alcohol, tobacco, gambling, biocides, GMOs, pornography, weapons, military or fossil fuel production; some also aim to avoid contraception and abortion. Often, they also aim to ensure that companies’ business practices are in line with international norms and conventions such as the UN Global Compact, Human Rights and/or Labour Rights Principles.

The areas of concern are often referred to ESG issues: environment, social justice, and corporate governance.

Although the strict definition of (S)RI and ESG is still subject to debate[2], it is clear there is strong upward momentum in sustainable development and investing across the investment value chain:

Source: oekom research, The Impact of SRI (2013)

Sustainable investment strategies

The global sustainable investment market has grown both in absolute and relative terms to US$21.4 trillion at the start of 2014[3] – equal to approximately 25% of all the world’s financial holdings.[4] US-domiciled assets engaged in sustainable and responsible investment practices totaled USD$3.3 trillion in 2012 and US$6.57 trillion in 2014[5].

Source: GSIA,‘Global Sustainable Investment Review 2014’

In the same time, the Principles for Responsible Investment initiative, established in 2005 by UNEP FI, has gained ground: PRI signatories reached 1,387 in July 2015, representing US$59 trillion of assets. According to PRI, the large majority of signatories have now adopted RI policies, and in the latest reporting cycle, 936 signatories reported on their progress in implementing the Six Principles. Read More