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

Tuesday, March 19, 2019

By Fan Yu

Socially responsible investing has gained traction in recent years. Traditionally, an underperforming niche product ignored by most serious investors, it has become a key investment rationale and a differentiator among portfolio managers.

There has been tangible growth of investment in companies that make a positive impact in terms of environmental, social, and governance issues—or ESG for short.

As of 2018, $12 trillion of professionally managed assets consider ESG factors in their criteria, according to a 2018 report issued by the Forum for Sustainable and Responsible Investment. That represents 25 percent of all professionally managed money in U.S. assets, and a 38 percent growth since 2016.

Despite the prominence of ESG in portfolio construction, ESG investing is still largely confined to U.S. companies. In other words, only U.S. companies are judged on their ESG impact.

Photo courtesy of Got Credit.