NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Thursday, February 25, 2016

“Why can’t my investment portfolio reflect my personal values?”  We’re increasingly hearing that question from clients who want to pursue sustainable investment strategies that align their personal values with their investments.  According to Morningstar, assets in socially screened portfolios now exceed $6 trillion, up from $639 billion in 1995.  Demand for sustainable investments seems particularly important to the millennials that represent the next generation of investors for advisors.  A Morgan Stanley survey of individual investors highlights this coming demand, as 71% of respondents and 84% of millennial investors expressed interest in sustainable investing.

Some investors pursue alignment with their personal values by excluding individual companies or economic sectors, others through inclusionary and exclusionary criteria at an individual company level.  Sustainable investing comes in many forms, covering distinct but not always clearly defined categories including sustainable investing, socially responsible investing (SRI), impact investing and environmental, social and governance investing (ESG).

We expect sustainable investing to enter the mainstream in coming years, making tomorrow’s approaches very different than the approaches that thrived in recent years.

Here are five trends to watch.