Studies show that women and Millennials are interested in sustainable investing. This is particularly important given that $30 trillion in wealth will be transferred from Baby Boomers to their heirs, including the 90 million Millennials, over the next several decades.1 Further, women today control $39.6 trillion, or about 30% of the world’s wealth, a number that is expected to climb to $72.1 trillion globally by 2020.2
Recognition from Government and Industry Organizations
In the past few years, government and industry organizations have changed their views toward ESG investing in ways that will greatly contribute to the growing interest in this investment approach.
- In October 2015, the U.S. Department of Labor (DOL) issued new guidance that ESG considerations “are proper components of the fiduciary’s primary analysis of the economic merits of competing investment choices,” opening the door for U.S. retirement plans to adopt ESG policies and strategies.4
- Many other countries require pension plans to disclose whether ESG data are incorporated into their investment funds’ policies and procedures, by integrating ESG principles into their mandatory investment framework or banning controversial investments.5
- As of April 2015, the United Nations Principles for Responsible Investment (PRI) signatory base represented $59 trillion in assets under management and more than 1,400 signatories worldwide, a 29% year-over-year increase. That constitutes well over half of the world’s institutional assets.6
- In 2016, Morningstar, Inc. introduced its Sustainability RatingTM for mutual funds to help investors gauge how well the companies in a fund’s portfolio are managing ESG factors.
ESG investing already has a strong presence in the institutional market, and we are seeing evidence of this trend playing out as more ESG funds and exchange traded funds (ETFs) for retail investors are being introduced. We anticipate that this growth will continue.
This is the second installment in a three-part series on the opportunity ESG is presenting to investors. View part one, “What is Sustainable Investing?” and part three, “Can ESG Enhance Returns?”
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1. Source: Accenture: The “Greater” Wealth Transfer: Capitalizing on the Intergenerational Shift in Wealth, 2016.
2. Source: Boston Consulting Group, “Global Wealth 2016: Navigating the New Client Landscape.”
3. Source: 2014 U.S. Trust Insights on Wealth and Worth Survey.®
4. Source: CalPERS Adopts Environmental, Social, and Governance Strategic Plan, www.calpers.ca.gov, as of August 15, 2016. State Comptroller DiNapoli Positions New York Pension Fund For Low Carbon Future, http://www.osc.state.ny.us, as of December 4, 2015. Long Term Stewardship: A Pragmatic Approach for ESG Integration for Institutional Investment, North Carolina Department of the State Treasurer, as of September 21, 2016.
5. Source: ESG: Becoming Mainstream. Institutional Investor, November 4, 2015.
6. Source: Unpri.org, as of April 2015
Mutual funds and exchange traded funds are subject to market risk and volatility. Shares may gain or lose value.
The stocks of companies with favorable ESG practices may underperform the stock market as a whole.
This material is provided for general and educational purposes only, is not intended to provide legal or tax advice, and is not for use to avoid penalties that may be imposed under U.S. federal tax laws. OppenheimerFunds is not undertaking to provide impartial investment advice or to provide advice in a fiduciary capacity. Contact your attorney or other advisor regarding your specific legal, investment or tax situation.