New numbers in Canada and the United States show that sustainable investing is no longer a niche trend, but rather has become a powerful force in money management that won’t be ignored.
A new report from the Forum on Sustainable and Responsible Investment in the U.S. recently calculated that almost $12 trillion US is currently invested in the country based on the principles of ESG — environmental, social and governance issues.
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That’s an increase of 38 per cent from 2016’s level and six times what it was barely two decades ago.
Canadian numbers show a similar trajectory. According to the recent annual report of the Responsible Investment Association (RIA), at the end of last year Canada had more than $2.1 trillion Cdn invested in assets based on at least one ESG principle. That’s more than half of all the assets under professional management, and it’s the first time the figure has tipped over the 50 per cent threshold.
What was once a niche part of the investment community has hit the mainstream to become a major determining factor when investors choose where to park their money.
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“Finally it feels like the world is catching up to me,” says Tim Nash, a Toronto-based fee-for-service financial planner and investment coach. Nash works with individual investors to help their create their portfolios, and he says that sustainability is one of the biggest long-term issues he’s warned investors to pay attention to for years.
Technically, the broad concept of sustainable investing runs the gamut of everything from environmental factors, to social issues such as fair labour practices to governance questions surrounding diversity and female representation. But Nash says, with environmental issues specifically, he sometimes has to deal with a negative bias where some people think that anything “green” is somehow by definition going to have a worse financial performance.
“If it’s a cleaning agent, they want the harsh chemicals; if it’s an electric car, they assume it doesn’t go as far; and with an investment they just assume performance is going to be worse,” he says, “against all evidence to the contrary.”