Morgan Stanley
  • Institute for Sustainable Investing
  • Feb 27, 2015

Sustainable Investing Enters the Mainstream

Investor demand has driven sustainable investing into the mainstream, where it is gaining momentum as a growing financial force for positive societal impact.

Sustainable investing has gone mainstream.

Today the practice of seeking long-term competitive financial returns together with positive societal impact represents more than 1-in-6 dollars of US assets under management, up from 1-in-9 dollars in 2012. Indeed, a new report from The Forum for Sustainable and Responsible Investment (US SIF) shows that, since 2012, total US assets under management using sustainable investing strategies increased 76% to $6.57 trillion.

Investor demand is driving growth. Clients are increasingly asking for sustainable investing products across all asset classes. Ultra-high-net-worth investors are beginning to shift their investment mix, realizing that they can harmonize their philanthropic goals with their investment philosophy.

Large public foundations, leading university endowments, state and local pensions, and a growing number of corporations are adjusting their strategies to avoid investments that could conflict with their missions or goals.

This demand is likely to accelerate. According to the Center on Wealth and Philanthropy at Boston College, younger generations in the US, including millennials, stand to inherit $36 trillion over the next 45 years. From what we know, millennials are far more likely to seek investments that combine solid financial returns with social and environmental benefits. The World Business Council for Sustainable Investment says sustainable investing opportunities generated by this transfer of wealth could total $10 trillion, or 4.5% of world GDP, by 2050.

Today’s sustainable investors do not expect to compromise financial return for positive environmental and social impact. Sustainability requires companies and investors to think long term. As the US SIF report notes: Sustainable investing promotes stronger corporate governance, builds long-term value for companies and their stakeholders, and fosters businesses and innovations that benefit society.

Making it easier and more appealing to access such investment opportunities helps compound their impact. Companies that hold themselves to high ethical and environmental standards will benefit the most from the popularity of sustainable investing, raising the bar for companies in general to improve their business practices. And that’s good for all of us.

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