2016Table of Contents
Foreword.........................................................................................................................................2
Executive Summary........................................................................................................................3
Introduction.....................................................................................................................................5
Sustainable Investing Defined.......................................................................................................6
Global Sustainable Investments 2014–2016.................................................................................7
Growth of Global SRI Assets......................................................................................................7
Sustainable Investment Strategies.............................................................................................8
Global Market Characteristics....................................................................................................9
Regional Market Characteristics...............................................................................................11
Regional Highlights......................................................................................................................12
Europe...................................................................................................................................... 12
United States............................................................................................................................12
Sustainable Investing in Latin America.....................................................................................13
Canada .....................................................................................................................................14
Australia and New Zealand...................................................................................................... 15
Asia ex Japan............................................................................................................................16
Investing for Impact in Africa....................................................................................................17
Japan........................................................................................................................................18
Spotlight on Green Finance.........................................................................................................19
China.........................................................................................................................................19
United States............................................................................................................................19
Europe.......................................................................................................................................20
Canada......................................................................................................................................21
Australia and New Zealand.......................................................................................................21
Conclusion....................................................................................................................................23
Appendix 1—Methodology and Data..........................................................................................24
Appendix 2—Glossary..................................................................................................................26
Appendix 3—Data Table...............................................................................................................27
Acknowledgements......................................................................................................................28

2016 Global Sustainable Investment Review

1Foreword
The Global Sustainable Investment Alliance (GSIA) is an international collaboration of membership-basedsustainable investment organizations. Our mission is to deepen and expand the practice of sustainable
investment through intentional international collaboration. We are pleased to present the Global Sustainable
Investment Review 2016, the third edition in the series since our inaugural review of sustainable investment
worldwide in 2012.
Since 2014, when we released our last biennial review, sustainable, responsible and impact investing has
continued to grow, with investor concerns and actions on climate change providing one of the importantdrivers on this growth. Accordingly, this edition features a special focus on green finance, with examples
from China, the United States, Europe, Canada, and Australia and New Zealand.
We are also pleased to be able to report on the activities of LatinSIF, launched in 2013, and the growthof sustainable and impact investing in Latin America. Sustainable investing is also making inroads on
the African continent, and we provide a snapshot of developments in the three major African economies:
Kenya, Nigeria and South Africa.
We want to thank the many sponsors—listed in the Acknowledgments page—of the regional research reports
used to prepare the Global Sustainable Investment Review 2016. We are grateful to US SIF: The Forum for
Sustainable and Responsible Investment, which led the production of the report.1 We also acknowledge
the role that the Principles for Responsible Investment (PRI) played in gathering data for Asia ex Japan. We
offer our gratitude to Bloomberg LP for the financial support it provided for the global review. Without thegenerous support of these sponsors, this report and the research on which it is based would not have beenpossible.
Sincerely,

Flavia Micilotta, Executive Director
Eurosif, the European Sustainable
Investment Forum

Lisa Woll, CEO
US SIF: The Forum for Sustainable and Responsible
Investment and the US SIF Foundation

Simon O’Connor, CEO
Responsible Investment Association Australasia

Deb Abbey, CEO
Responsible Investment Association Canada

1. US SIF however relies on data provided by other regions and is not responsible for the content or accuracy of non US reports and data.

2

2016 Global Sustainable Investment Review

Executive Summary
In early 2015, the Global Sustainable Investment Alliance (GSIA) released the Global Sustainable Investment
Review 2014, which collated the results from the market studies of regional sustainable investment forums
for Europe, the United States, Canada, Asia, Japan, and Australia and New Zealand. In the period since thelast report was released, the global sustainable investment market has continued to grow, and in most of
the regions covered by GSIA’s member organizations, its share of professionally managed assets has also
grown. This report summarizes the status of sustainable and responsible investing in these markets at thestart of 2016.
Globally, there are now $22.89 trillion of assets being professionally managed under responsible investment
strategies, an increase of 25 percent since 2014. In all the regions except Europe, which tightened its
definition of sustainable investing, sustainable investing’s market share has grown. In relative terms,
responsible investment now stands at 26 percent of all professionally managed assets globally. Clearly,
sustainable investing constitutes a major force across global financial markets.
From 2014 to 2016, the fastest growing region has been Japan, due to greater reporting and sustainable
investing activity by Japanese institutional asset owners, followed by Australia/New Zealand and Canada.
In terms of assets, the largest three regions were Europe, the United States and Canada, respectively.
Sustainable investing is an investment approach that considers environmental, social and governance (ESG)
factors in portfolio selection and management. For the purpose of this global report and for articulating ourshared work in the broadest way, GSIA uses an inclusive definition of sustainable investing, without drawing
distinctions between this and related terms such as responsible investing and socially responsible investing.
These are collectively referred to as sustainable investing or SRI.
Sustainable investment encompasses the following activities and strategies:
1. Negative/exclusionary screening,
2. Positive/best-in-class screening,
3. Norms-based screening,
4. Integration of ESG factors,
5. Sustainability themed investing,
6. Impact/community investing, and7. Corporate engagement and shareholder action.
The largest sustainable investment strategy globally is negative/exclusionary screening ($15.02 trillion),
followed by ESG integration ($10.37 trillion) and corporate engagement/shareholder action ($8.37 trillion).
Negative screening is the largest strategy in Europe, while ESG integration now dominates in the UnitedStates, Canada, Australia/New Zealand and Asia ex Japan in asset-weighted terms. Corporate engagement
and shareholder action is the dominant strategy in Japan.
Impact investing is a small but vibrant segment of the broader sustainable and responsible investing
universe in all the markets studied. GSIA defines impact investing as targeted investments, typically made inprivate markets, aimed at solving social or environmental problems. Community investing, whereby capitalis specifically directed to traditionally underserved individuals or communities, is included in this category,as is finance that is provided to businesses with an explicit social or environmental purpose.
In Europe, total assets committed to sustainable and responsible investment strategies grew by 12 percent
from 2014 to 2016 to reach $12.04 trillion. Fifty-three percent of total professionally managed assets in
Europe now use responsible investment strategies. Exclusionary screens remain the dominant strategy at2016 Global Sustainable Investment Review

3$11.06 trillion, a growth rate of 48 percent over the past two years. Norms-based screening is the second
biggest SRI approach with over $5.55 trillion in assets, a growth rate of 40 percent from 2014. Engagement
and voting follows quite closely in terms of popularity, with over $4.65 trillion in assets and 30 percent
growth. Using a narrower definition of ESG integration in 2016 and recalculating the 2014 ESG integration
total, Eurosif found that this strategy grew 39 percent over the two-year period to reach $2.88 trillion.
Impact investing is once again the fastest growing strategy with growth of 385 percent, although the assets
remain small ($107.2 billion). There is increasing overlap between SRI strategies in Europe, with investment
vehicles frequently using more than one. As a result, in percentage terms, the overall tally of SRI has grownby a smaller percentage—12 percent—than each of the constituent strategies.
US sustainable, responsible and impact investing continues to rise, with total SRI assets at the beginning of2016 at $8.72 trillion, up 33 percent from $6.57 trillion in 2014. Of this, $8.10 trillion is held by institutional
investors, money managers and community investment institutions applying various environmental, socialand governance criteria in their investment analysis and portfolio selection. In addition, from 2014 to 2016,
176 institutional investors and 49 investment management firms with total assets of $2.56 trillion filed or
co-filed resolutions on ESG issues at publicly traded companies. Eliminating double counting for assets
involved in both strategies yields the overall total of $8.72 trillion, which represents nearly 22 percent all
investment assets under professional management in the United States. ESG integration, the dominant
strategy, affects approximately $5.8 trillion in assets.
Canada’s responsible investment market continues to experience growth. According to survey data fromthe Responsible Investment Association of Canada, assets managed using one or more responsible
investment strategies increased from $729.0 billion to $1.09 trillion in two years, a 49 percent increase. In
relative terms, 38 percent of total professionally managed assets use responsible investment strategies. The
dominant sustainable investing strategy in 2016 was ESG integration ($1.05 trillion), followed by corporate
engagement and shareholder action ($862.1 billion). The top three engagement issues were: executive
compensation, greenhouse gas emissions and supply chain management. Impact investing continues tobe a small but important category of SRI: Canadian impact investment assets now stand at $6.7 billion,
growing 123 percent since 2014.
Responsible investment assets managed by asset managers, asset owners, banks and advisors in Australia
and New Zealand grew substantially, both at retail levels and institutional levels, across all responsible
investment strategies. In both countries combined, responsible investment assets have grown from 2014
to 2016 to reach $515.7 billion, and to a point where in Australia, sustainable investments now account for
50 percent of all professionally managed assets.
The overall market for sustainable investment in Asia has been growing more slowly than in previous periods.
As of 2016, $52.1 billion in assets were managed using one or more sustainable investment strategies.
When Sharia-compliant funds are excluded, the total sustainable investment assets total $34.2 billion.
Sustainable investment assets have grown 16 percent since 2014, compared to 32 percent from 2012 to2014. The most common strategies are ESG integration, representing $24.5 billion of assets, and negative/
exclusionary screening, with $18.8 billion in assets. The fastest growing strategies are sustainability themed
investments with a growth rate of 198 percent, and negative/exclusionary screening with a growth rate of
14 percent.
According to the Japan Sustainable Investment Forum (JSIF), the total sustainable investment market in
Japan is measured at $473.6 billion, up from $7.0 billion during the last review. The dramatic growth canbe explained by a number of changes to the sustainable investment market in Japan since 2014 alongwith new surveys by JSIF that provided information for the first time on the sustainable investing strategies
of large institutional asset owners. JSIF found that corporate engagement and shareholder action is thedominant strategy at $289.6 billion, applying to 61 percent of SRI assets. ESG integration ($120.0 billion)is the second biggest approach, with 25 percent of SRI assets. Norms-based screening ($56.0 billion) andpositive screening/best-in-class ($25.1 billion) follow, with 12 percent and 5 percent, respectively.

42016 Global Sustainable Investment Review

Introduction
The Global Sustainable Investment Alliance (GSIA) is pleased to release the Global Sustainable Investment
Review 2016, the third edition of this biennial report. This review continues to be the only report collating
results from the market studies of regional sustainable investment forums from Europe, the United States,
Canada, Australia and New Zealand, and Japan. It provides a snapshot of the sustainable and impact
investing in these markets at the start of 2016 by drawing on the in-depth regional and national reports from
GSIA members—Eurosif, Responsible Investment Association Australasia, RIA Canada and US SIF—as
well as reports and insights from the Principles for Responsible Investment (PRI) and Japan Sustainable
Investment Forum (JSIF). PRI provided data on Asia ex Japan, while JSIF covered Japan.
Since the launch of the inaugural study in 2012, the sustainable investment market has continued to growand evolve globally. While each region’s approach to sustainable investment is slightly different, some trends
have had a global reach. Every region saw a rise in ESG integration, sustainability themed investing andimpact or community investing. Growing concern over climate change has resulted in rising interest in green
finance, including climate-aligned bonds.
This report introduces the Latin American Sustainable Investment Forum (LatinSIF). Created in 2013, theLatinSIF is gathering knowledge, resources and capacity to support sustainable and impact investing
opportunities in several countries in North, Central and South America, some of which are highlighted here.
This report also presents data on the African sustainable investing market for the second time since the2012 edition of the Review, thanks to the cooperation of the African Investing for Impact Barometer basedat the University of Cape Town’s Graduate School of Business.
Together, these resources provide data points, insights, analysis and examples of the shape of sustainable
investing worldwide.
Unless stated otherwise, all assets in this report are presented in US dollars. All 2016 assets are reported asof December 31, 2015, except for Japan, which reports as of March 31, 2016, and currencies are converted
to US dollars at the exchange rate prevailing on December 31, 2015, for comparability. Historical 2014
data are reported as of December 31, 2013, except for Japan which is reported as of September 30, 2014.
The 2014 asset data (unless otherwise specified) have also been converted into US dollars at the exchange
rate prevailing on December 31, 2015, in order to avoid introducing currency exchange rate trends into thecalculations. Refer to Appendix 1 for more information on methodology and data.

2016 Global Sustainable Investment Review

5Sustainable Investing Defined
Sustainable investing is an investment approach that considers environmental, social and governance (ESG)
factors in portfolio selection and management. For the purpose of this global report and for articulating ourshared work in the broadest way, GSIA uses an inclusive definition of sustainable investing, without drawing
distinctions between this and related terms such as responsible investing and socially responsible investing.
These are collectively referred to as sustainable investing or SRI.
The GSIA definitions of sustainable investment, published in the Global Sustainable Investment Review
2012, have emerged as a global standard of classification. These are:
1. Negative/exclusionary screening: the exclusion from a fund or portfolio of certain sectors, companies
or practices based on specific ESG criteria;

2. Positive/best-in-class screening: investment in sectors, companies or projects selected for positive
ESG performance relative to industry peers;
3. Norms-based screening: screening of investments against minimum standards of business practicebased on international norms;

4. ESG integration: the systematic and explicit inclusion by investment managers of environmental, socialand governance factors into financial analysis;
5. Sustainability themed investing: investment in themes or assets specifically related to sustainability (forexample clean energy, green technology or sustainable agriculture);

6. Impact/community investing: targeted investments, typically made in private markets, aimed at solvingsocial or environmental problems, and including community investing, where capital is specificallydirected to traditionally underserved individuals or communities, as well as financing that is provided tobusinesses with a clear social or environmental purpose; and7. Corporate engagement and shareholder action: the use of shareholder power to influence corporate
behavior, including through direct corporate engagement (i.e., communicating with senior management
and/or boards of companies), filing or co-filing shareholder proposals, and proxy voting that is guided bycomprehensive ESG guidelines.
The sum of these individual strategies, after adjusting for double counting since some assets are subjected
to more than one strategy, results in the sustainable assets under management included in this report. In thereport the aggregated figure is referred to as sustainable investment or investment taking into account ESG
concerns, without making a judgment about the quality or depth of the process applied.

62016 Global Sustainable Investment Review

Global Sustainable Investments
2014–2016
Growth of Global SRI Assets

Global sustainable investment assets are continuing to increase, albeit at a slower pace than in previous
years. At the start of 2016, global sustainable investment reached $22.89 trillion, compared with $18.28
trillion in 2014, an increase of 25 percent. Previously, global sustainable investment assets grew 61 percent
from 2012 to 2014. Still, nearly all regions saw increases in their SRI assets relative to their total professionallymanaged assets, with the greatest rise seen in Australia and New Zealand. (See Tables 1 and 2.)
Table 1: Growth of SRI Assets by Region 2014–2016
			Growth			
overRegion2014
2016
periodEurope$ 10,775

United States$ 6,572

CanadaAustralia/New Zealand

Asia ex Japan

Japan

Total

$

729

$

148

$

7

$

45

$ 18,276$ 12,040

$

$

$

$

$

8,723

1,086

11.7%

CompoundAnnualGrowth Rate
5.7%

32.7%

15.2%

49.0%

22.0%

516

247.5%

86.4%

474

6689.6%724.0%

52$ 22,890

15.7%

25.2%

7.6%

11.9%

Note: Asset values are expressed in billions.
Asia ex Japan 2014 assets are represented in US dollars based on the exchange rates at year-end 2013. All other 2014 assets, as well as all
2016 assets, are converted to US dollars based on exchange rates at year-end 2015.

Table 2: Proportion of SRI Relative to Total Managed Assets

Region2014

Europe58.8%

Canada31.3%

United States
Australia/New Zealand
Asia

2016

52.6%

17.9%

21.6%

16.6%

50.6%

0.8%

37.8%
0.8%

Japan		3.4%
Global

30.2%

26.3%

Note: Asia figure includes Japan in 2014, but excludes Japan in 2016. Eurosif used a narrower definition of SRI
in 2016 than in 2014. See Appendix I: Methodology and Data, for details.

Just over half of the SRI assets referred to in this report are in Europe (53 percent), but the relative contributionof the United States increased to 38 percent in 2016, as shown in Figure 1.

2016 Global Sustainable Investment Review

7Figure 1: Proportion of Global SRI Assets by Region

Europe 52.6%
United States 38.1%
Canada 4.7%
Australia/NZ 2.3%

US$22.9 trillion

Asia ex Japan 0.2%
Japan 2.1%

Over this two-year period, Japan, tracked separately in this year’s Review, has been the fastest growing
region, due in part to new surveys by JSIF that provided information for the first time on numerous large
asset owners. (See Regional Highlights for additional information.) This is followed by Australia and New
Zealand, and then Canada and the United States.

Sustainable Investment Strategies

The largest sustainable investment strategy globally is negative/exclusionary screening ($15.02 trillion),
followed by ESG integration ($10.37 trillion) and corporate engagement/shareholder action ($8.37 trillion),as shown in Figure 2. Negative screening is the largest strategy in Europe, while ESG integration leads in the
United States, Canada, Australia/New Zealand and Asia ex Japan. Japan’s primary sustainable investment
strategy is corporate engagement and shareholder action.
Figure 2: SRI Assets by Strategy and Region
EuropeImpact/community investing

United States

Sustainability themed investing

CanadaPositive/best-in-class screening

Australia/NZ

Corporate engagement and shareholder action

Asia ex Japan

Norms-based screeningJapan

ESG integration
Negative/exclusionary screening
US $billions 0

2,000

4,000

6,000

8,000 10,000

12,000 14,000 16,000

All SRI strategies continued to experience growth between 2014 and 2016, as shown in Figure 3. The fastest
growing strategies, although also the smallest in absolute dollar terms, were impact/community investing(146 percent) and sustainability-themed investing (140 percent), as shown in Table 3. Europe and the UnitedStates were the largest contributors to both of these categories.

82016 Global Sustainable Investment Review

Figure 3: Growth of Strategies 2014–2016$12,046

Negative/exclusionary screening$7,527

ESG integration$5,919Corporate engagement and shareholder action$4,385

Norms-based screening
Positive/best-in-class screening$10,369$8,365$6,210$890$1,030

Sustainability themed investing

$138
$331

Impact/community investing

$101
$248

US $billions 0$15,023

2,000
2014

4,000

6,000

8,000 10,000

12,000 14,000 16,000

2016

Also continuing to grow are norms-based screening (42 percent) corporate engagement/shareholder action(41 percent), ESG integration (38 percent), negative/exclusionary screening (25 percent) and positive/
best-in-class screening (16 percent).
Table 3: Growth of Strategies 2014–2016
Strategy

2014

Sustainability themed investing$137

Impact/community investing

Positive/best-in-class-screening

Norms-based screening

Corporate engagement and shareholder action
ESG integration

Negative/exclusionary screening

$101
$890

2016

Growth

$331

140%

$248
$1,030

CAGR

146%

56.8%

16%

7.6%

55.1%

$4,385$6,21042%

19.0%$7,527$10,369

38%

17.4%

$5,919$12,046$8,365$15,023

41%
25%

18.9%
11.7%

Note: CAGR=compound annual growth rate. Asset values are expressed in billions.

Global Market Characteristics

INSTITUTIONAL AND RETAIL INVESTORS: Investments managed by professional asset managers are often

classified as either retail or institutional. Retail assets are personal investments by individuals in professionallymanaged funds purchased in banks or through investment platforms. Institutional assets are the assets oflarge asset owners such as pension funds and insurers. It has been a feature of the SRI market in most of
the regions that professional institutional investors dominate the market, but interest by retail investors in
SRI is continuing to grow.
Indeed, the relative proportion of retail SRI investments in Canada, Europe and the United States increased
from 13 percent in 2014 to 26 percent at the start of 2016 (this data was not collected in2016 Global Sustainable Investment Review

9Australia/New Zealand and Asia), as shown in Figure 4. Over a third of SRI assets in the United States
were retail.
Figure 4: Institutional/Retail SRI Assets
100%
90%
80%
70%

13.1%

25.7%

86.9%
74.3%

60%
50%
40%
30%
20%
10%
0%

2014		2016
RetailInstitutional

ASSET ALLOCATION: SRI asset allocation can vary greatly from market to market. In Canada and Europe,

most of the assets are in bonds (64 percent) and equities (33 percent), as shown in Figure 5. This is a flipfrom 2014, when 50 percent of assets were in equities and 40 percent in bonds, and is largely a reflectionof the rise in green bonds over this time period. The other regions did not collect data on asset allocation.
Figure 5: SRI Asset Allocation in Canada and Europe
0.6%
1.1%

1.4%

32.6%

EquityBonds
Real Estate/Property

64.4%

Note: Other includes alternatives/hedge funds, monetary/deposits, commodities and infrastructure.

102016 Global Sustainable Investment Review

PE/VC
Other

Regional Market Characteristics

There are significant differences in the SRI strategies investors choose to employ at the regional level,
resulting in interesting weightings based on geography. For example, although the Australia/New Zealandregion holds just 2.3 percent of global SRI assets, it accounts for a much larger share of global sustainability
themed investing and ESG integration, as shown in Figure 6. Canada has 4.7 percent of global SRI assets,
but 21.3 percent of assets within the positive/best-in-class strategy. The United States accounts for the
major global share of assets engaged in ESG integration and impact investing. Meanwhile, Europe holds
nearly three-quarters of the global SRI assets in the negative/exclusionary screening strategy, comparedwith 52.6 percent of global SRI assets.
Figure 6: Regional Share, by Asset Weight, in Global Use of SRI Strategies
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

Impact/community
investing

Sustainability
themedinvesting

Positive/best-in-classscreening

Norms-based
screening

Corporate
engagement
andshareholder
actionESG
integration

Negative/
exclusionary
screening

Japan

3.2%

2.6%

2.4%

0.9%

3.5%

1.2%

0.1%

Asia ex Japan

0.0%

1.9%

0.1%

0.0%

0.0%

0.2%

0.1%

Australia/NZ

1.1%

5.2%

0.0%

0.3%

0.0%

4.6%

0.0%

Canada

2.7%

20.3%

21.3%

9.5%

10.3%

10.1%

2.3%

United States

49.8%

22.2%

24.0%

0.0%

30.6%

56.0%

23.8%

Europe

43.2%

47.9%

52.2%

89.3%

55.6%

27.8%

73.6%

2016 Global Sustainable Investment Review 11

Regional Highlights
EuropeIn Europe, total assets committed to sustainable and responsible investment strategies grew by 12 percent
from 2014 to 2016 to reach $12.04 trillion. This tally comprises institutional and retail assets from 13
European markets.
Exclusionary screens remain the dominant strategy at $11.06 trillion, growing 48 percent since 2014 and now
represented in 48 percent of the total European professionally managed assets. Norms-based screening is
the second biggest SRI approach with over $5.55 trillion in assets, a growth rate of 40 percent from 2014.
Engagement and voting follows quite closely in terms of popularity, with over $4.65 trillion in assets and 30
percent growth. Recalculating ESG integration in 2014 and 2016 with a narrower definition, Eurosif foundthat use of this strategy, based on assets affected, grew 39 percent, to reach $2.88 trillion.2
There is increasing overlap between SRI strategies in Europe, with investment vehicles frequently using
more than one. As a result, in percentage terms, the overall tally of SRI has grown by a smaller percentage—
12 percent—than each of the constituent strategies.
Impact investing is once again the fastest growing strategy with growth of 385 percent, although the assets
remain small ($107.2 billion). Impact investing is followed by sustainability themed investments with a growthof 146 percent. This is a particularly interesting shift, since this strategy registered the slowest growth during
the last review. Renewable energy and energy efficiency remain as the top categories of investment for thisstrategy. Both impact investing and sustainability themed investments benefited from increasing concerns
about climate change, perhaps driven by key international events such as the 2016 Paris Agreement.
Although institutional investors continue to lead the market, the retail sector has grown from 3.4 percent to22 percent.
The asset allocation distribution registered a significant decrease in equities, at 30 percent of total European
SRI assets compared with 50 percent in 2014. There was a sharp increase in bonds, now at 64 percent
from the 40 percent registered in 2014. This rise correlates closely with a surge in green bonds, underlining
continued climate concerns.
Fiduciary duty considerations have been recognized as a main driver for SRI, sending a very strong message
to policy makers. Many fund managers have begun to see ESG considerations as part of their investment
obligations in line with fiduciary duty.

United States

US sustainable, responsible and impact investing continues to rise, with total SRI assets at the beginning of2016 at $8.72 trillion, up 33 percent from $6.57 trillion in 2014.
Of this, $8.10 trillion is held by institutional investors, money managers and community investment institutions
applying various environmental, social and governance criteria in their investment analysis and portfolio
selection. It also includes $2.56 trillion in US-domiciled assets held by institutional investors and money
managers who filed or co-filed shareholder resolutions on ESG issues at publicly traded companies from2014 through 2016. Eliminating double counting for assets involved in both strategies yields the overall total
2. In 2014, Eurosif’s ESG integration consisted of three categories, including ESG research and analysis made available to mainstream analysts and fundmanagers. Eurosif removed this category from its 2016 measure of European ESG integration assets and therefore from its overall total of European SRI
assets. For more information, please review Appendix 1.

122016 Global Sustainable Investment Review

SUSTAINABLE INVESTING IN LATIN AMERICA

The creation of the Latin American Sustainable Investment Forum (LatinSIF), in 2013, has highlighted and assisted
numerous initiatives to promote sustainable investing in the region. With the support of financial institutions,stock exchanges, service providers and other key market players, LatinSIF aims to gather knowledge, capacity
and resources to developing the sustainable and impact investing market in several countries.
LatinSIF started in Colombia with support from global research firm Sustainalytics, Grupo Sura, Bancolombia,
Deloitte and the Colombia Stock Exchange. The Colombia Stock Exchange was one of the first Latin American
exchanges, after Brazil’s, to sign on to the Sustainable Stock Exchange (SSE) initiative. In addition, the launch of
the Green Protocol, an association that seeks to strengthen the ESG credentials of Colombia’s main banks andfinancial institutions, has enabled the creation of “green financing lines” for environmentally sustainable projects.
In Argentina, Acrux Partners, an advisory firm focused on responsible and impact investing in South America,
has been in conversation with senior decision makers at the National Pension Fund (ANSES), major banks,
private investors, the Buenos Aires Stock Exchange and the government, to advocate that they incorporate ESG
factors into their investment analysis and practice. Successes so far include the subscription of the Buenos
Aires Stock Exchange to the SSE Initiative and the incorporation of an ESG clause in the first fund of funds thegovernment will launch in 2017.
In Chile, consulting firm Governart and research group Vigeo have been key advocates for the developmentof sustainable and responsible investing. Achievements to date include the signing of the SSE initiative by
the Santiago Stock Exchange and the subsequent launch of the exchange’s sustainability index. Since 2016,
publicly traded Chilean companies have been required to report on sustainability issues under a regulation
issued by the main corporate regulatory office.
In Mexico, the most important driver for responsible investing is international investors. The Mexican Stock
Exchange is a partner in the SSE Initiative and has had a sustainability index since 2011. The AFORES (Private
Pension Funds) in Mexico, the main domestic investors in the country, are beginning to develop ESG strategies,
not necessarily because they see ESG strategies as a value driver, but in response to international pressure. At
the same time, the Biological Diversity Summit held in Mexico in 2016 helped spur large enterprises and financial
institutions such as ASN Bank and Banorte to start measuring their biodiversity footprint.
Peru’s Programme for Responsible Investment (PIR), a founding member of LatinSIF, is an initiative led by theLima Stock Exchange, Grupo Sura and COFIDE, Peru’s state development bank. Created in 2014 after the
COP20 in Lima, it has provided technical assistance and training for local investors to develop and implement
responsible investment practices. PIR has been a key promoter of new regulation on corporate sustainability
reporting that goes into effect March 2017.
Cross-border initiatives are also underway. These include the RI LatAm Conference hosted in Santiago in 2015
and 2016, and the ALAS20, an initiative that seeks to give recognition to excellence in sustainable and responsible
practices in investment companies in Brazil, Chile, Colombia, Mexico and Peru. Meanwhile, stakeholders inArgentina, Paraguay and Uruguay have joined together to create an impact investment task force and launch an
impact investment fund for the three countries.

of $8.72 trillion, which represents nearly 22 percent all investment assets under professional managementin the United States.
Several factors are driving the growth in ESG assets held by money managers. These include: market
penetration of SRI products, the development of new products that incorporate ESG criteria, and theincorporation of ESG criteria by numerous large asset managers across wider portions of their holdings.
Much of this activity is coming to light because of increased disclosures by signatories to the Principles for
Responsible Investment.
2016 Global Sustainable Investment Review 13

Of the managers that responded to an information request about reasons for incorporating ESG, the top
factor was client demand, cited by 85 percent. Sixty-two percent reported that they use some combinationof negative screening, positive screening, and ESG integration within their funds. More than half reported
using impact investing strategies, and nearly half used sustainability themed investing as a strategy. The
incorporation strategy that affected the highest number of assets was ESG integration; extrapolating fromthe sample of managers, it would affect $5.8 trillion of SRI assets.
With $4.72 trillion of ESG assets, a 17 percent increase since the start of 2014, institutional investors
play a substantial role in the SRI universe. The leading and often overlapping ESG criteria institutional
investors consider are: restrictions on investing in companies doing business in regions with conflict risk($2.75 trillion), consideration of climate change and carbon emissions ($2.15 trillion), and unspecified generalenvironmental, social, and governance criteria ($1.2 trillion).
Climate change remains the most significant overall environmental factor in terms of assets, affecting$1.42 trillion in money manager assets and $2.15 trillion in institutional investor assets—more than threetimes the amounts affected in 2014. Moreover, shareholders concerned about climate risk filed 93 resolutions
specifically on the subject in 2016 and negotiated a number of commitments from the target companies toreport on strategic planning around climate change or to reduce their greenhouse gas emissions.
The number of institutions and managers filing shareholder resolutions has remained stable over the past
four years. From 2014 to 2016, 176 institutional investors and 49 investment management firms with total
assets of $2.56 trillion filed or co-filed resolutions. In addition to filing shareholder resolutions, managers
and institutional investors are also pursuing engagement strategies on ESG issues. Fifty-seven institutional
investors reported doing so, as did 61 asset managers.
Looking ahead, regulatory developments that could further promote sustainable investing in the United States
are recent decisions by the US Department of Labor (DOL). DOL is responsible for enforcing the Employment
Retirement Income Security Act (ERISA) which governs private sector pension plans. In October 2015,
DOL rescinded its 2008 bulletin on Economically Targeted Investments, which had discouraged fiduciaries
for private sector retirement plans from considering environmental and social factors in their investments,
and was a major departure from its 1994 guidance that had essentially stated the opposite. In addition torescinding the 2008 guidance, DOL issued an Interpretive Bulletin that makes clear that “fiduciaries neednot treat commercially reasonable investments as inherently suspect or in need of special scrutiny merely
because they take into consideration environmental, social or other such factors.”3
At year-end 2016, the DOL also rescinded another 2008 Interpretive Bulletin, this one relating to the Exerciseof Shareholder Rights, and replaced it with guidance that notes the positive role fiduciaries play throughthe exercise of shareholder rights. The 2008 guidance had appeared to discourage ERISA plan fiduciaries
from exercising their shareholder rights. Additionally, the 2016 guidance also reinforced that environmental,social and governance impacts can be intrinsic to the market value of an investment.

CanadaCanada’s responsible investment market is experiencing continued growth. According to survey datafrom the Responsible Investment Association of Canada, assets managed using one or more responsible
investment strategies increased from $729.0 billion to more than $1.08 trillion in two years, a 49 percent
increase. The growth can be attributed to at least four factors:• Investment managers are increasingly engaging in responsible investment, including taking ESG issues into
account when making investment decisions and signing onto the Principles for Responsible Investment.
3. Federal Registrar, Interpretive Bulletin Relating to the Fiduciary Standard Under ERISA in Considering Economically Targeted Investments, A Rule by the
Employee Benefits Security Administration on October 26, 2015. Available at https://www.federalregister.gov/documents/2015/10/26/2015-27146/
interpretive-bulletin-relating-to-the-fiduciary-standard-under-erisa-in-considering-economically.

14

2016 Global Sustainable Investment Review•T here is an increasing awareness of the significance of ESG opportunities and risks when it comes tolong-term returns.
•C anada’s pension funds grew by $374 billion over the past two years, an increase of 45 percent.
•M illennial investors are becoming an increasingly important demographic, and are much more likely toconsider ESG factors when making investment decisions.
Canadian investors and investment managers employ numerous, often overlapping, sustainable investing
strategies, but four strategies are key. The dominant strategy in 2016 was ESG integration ($1.05 trillion),used in the management of 97 percent of Canadian responsible investing assets. Corporate engagement
and shareholder action is the second most prominent strategy, with $862.1 billion, representing 79 percent
of assets. The top three engagement issues are: executive compensation, greenhouse gas emissions andsupply chain management. Norms-based screening ($589.7 billion) and negative screening ($347.0 billion)
represent 54 percent and 32 percent, respectively, of Canada’s SRI assets.
Impact investing continues to be a small but important category of SRI. Canadian impact investment
assets stood at $6.7 billion at the start of 2016, an impressive 123 percent increase since 2014. This canbe attributed to increasing demand from institutional and high-net-worth investors, growing availability of
impact investment products, and a deeper understanding by investors of how to generate positive socialand environmental impacts across asset classes.
Recent policy developments in Canada could help drive further growth in responsible investing. Under
Ontario’s Pension Benefits Act, pension plans have been required since January 2016 to report in theirstatements of investment policies and procedures whether they incorporate ESG factors and if so, how.
Many of Canada’s large public sector pension funds supported the Ontario legislation, and it is expectedthat other provinces will implement similar pension disclosure requirements. On the national front, RIA
Canada is part of a broad coalition of advocates who are asking the Canadian federal government to follow
Ontario’s lead. They seek an amendment to the regulations under the Pension Benefits Standards Act torequire federally registered pension plan administrators to disclose whether, and how, they consider ESG
issues in investment policy.

Australia and New Zealand

Responsible investment assets managed by asset managers, superannuation funds, banks and advisers
in Australia and New Zealand grew substantially, both at retail levels and institutional levels, across all
responsible investment strategies.
In both countries combined, SRI assets overall have grown by 248 percent since 2014 to reach$515.7 billion. These assets now make up a substantial portion of the professional investment market inthis region, including 50 percent of professionally managed assets in Australia. This development reflects
the strong commitment to ESG integration by some of the region’s largest investment institutions acrosssovereign wealth funds, superannuation and funds management.
In Australia, “core” responsible investment strategies—those incorporating screening, sustainability themed
investments, impact investments and community finance—grew 62 percent in one year, to $37.6 billion in
assets under management. Core responsible investment strategies—those most closely related to retailethical and SRI investments—account for 3.8 percent of Australia’s total professionally managed assets($978.2 billion), up from 2.5 percent in 2014. This is a key indicator of the rising consumer demand for
responsible investment options in Australia that is increasingly shaping the market, and resulting in aflourishing of new investment offerings for an increasingly engaged consumer.
The growth is explained by both performance and inflows. Measured against mainstream equivalent funds
and their benchmark index, Australia’s core responsible investment funds outperformed across most fundcategories and time horizons:
2016 Global Sustainable Investment Review 15• Core Responsible Investment Australian Equities Funds outperformed both the ASX300 and theaverage large cap Australian equities funds across one, three, five and 10 years.

•C ore Responsible Investment International Equities Funds outperformed large cap international
equities funds over five and 10 years, but slightly underperformed in the short term.
•Core Responsible Multi-Sector Growth Funds (Balanced Funds) outperformed their equivalent
mainstream multi-sector growth funds over all time periods—one, three, five and 10 years.

In New Zealand, responsibly invested assets grew 28 percent annually from 2014 to 2016 to reach$53.5 billion. The most significant component of responsible investment in New Zealand involves
larger owners and asset managers taking an ESG integration approach across their entire funds (asopposed to offering standalone SRI options). This category constituted 98 percent of total responsible
investment assets.
In New Zealand and Australia, there is a continued trend for ESG and ethical factors to be consideredsystematically across the full financial sector. Consumer demand continues to surge and investment
organizations are moving to meet this demand, developing products and options across all asset classes
and all investment styles.
Notably, the Australian Stock Exchange now requires its listed companies, under its recently revised
Corporate Governance Guidelines, to report on any material exposure to sustainability risks. The New
Zealand exchange has also undertaken a recent consultation to investigate the implementation of a similar“comply or explain” reporting requirement for listed companies around ESG issues.

Asia ex JapanThe overall market for sustainable investment in Asia ex Japan has been growing more slowly than inprevious periods. As of 2016, $52.1 billion in assets were managed using one or more sustainable investment
strategies. When Sharia-compliant funds are excluded, the total sustainable investment assets total $34.2
billion. Sustainable investment assets have grown 16 percent between 2014 and 2016, compared to
32 percent from 2012 to 2014.
The most common strategies are ESG integration, representing $24.5 billion of assets, and negative/
exclusionary screening, with $18.8 billion in assets. The fastest growing strategies are sustainability themed
investments with an annualized growth rate of 73 percent, and negative/exclusionary screening with anannualized growth rate of 7 percent.
Although growth in total sustainable fund assets may have slowed, the number of funds available toinvestors has grown by 15 percent per year from 2014 to 2016, compared with 11 percent from 2012 to2014, reaching a total of 658 funds.
The largest markets for sustainable investing in Asia ex Japan are: Malaysia (30 percent), Hong Kong
(26 percent), South Korea (14 percent) and China (14 percent). The fastest growing market for sustainable
investing is China, with a growth of 105 percent since the start of 2014, followed by India (104 percent) andPakistan (50 percent).
Sustainability themed assets have attracted particular interest in China. These assets have grown
157 percent annually since 2014, from $450.9 million to $2.9 billion, a majority of them related to clean
energy. This can be attributed to China’s growing interest in green finance and its policy commitments
to curtail carbon emissions by 2030. In the coming year, China is expected to make further advances inclimate change and environmental policy, including drafting a climate change law and establishing carbon
trading regulation. Access to environmental data is still a challenge, but solid data could be provided soonby institutions such as the Institutes of Science and Development, the Chinese Academy of Sciences, andprivate institutions such as Trucost.

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2016 Global Sustainable Investment Review

INVESTING FOR IMPACT IN AFRICA

The African Investing for Impact Barometer, an annual publication of the Bertha Centre for Social Innovationand Entrepreneurship at the University of Cape Town’s Graduate School of Business, documents the range
of investments in Africa that combine financial returns and positive impact on society and environment. The
Barometer refers to sustainable and responsible investments as the investing for impact market and includes
ESG integration, corporate engagement, screening (positive, negative and norms-based), thematic investingand impact investing.
The Barometer focuses on the three largest economies in Eastern, Western and Southern Africa: Nigeria, Kenya
and South Africa. South Africa holds the biggest share of total assets with 94 percent ($678 billion) surveyed.
Nigeria is second with 4 percent ($30 billion), followed by Kenya with 2 percent ($13 billion). Of the $721 billionof investment assets surveyed across the three countries, 47 percent of all funds implemented one or moresustainable investing strategies.
The fund managers surveyed include asset managers as well as private equity and venture capital firms investing
locally across the three countries. The Barometer also includes fund managers who have headquarters outsideof the countries, but have capital invested in the countries. The survey is compiled from publicly available
information sourced from fund manager disclosures on their websites, reports and fund fact sheets as of 2015.
Additional information is sourced from regulators and industry associations, again where information is publicly
available.
ESG integration and engagement are the most prevalent strategies in South Africa and Kenya, and corporate
governance appears to be the most integrated of the ESG categories. South African asset managers appear
to be more transparent about ESG integration and engagement relative to Kenya and Nigeria. This can be
attributed to the fact that South Africa’s largest asset managers and private equity firms are signatories of PRI
and/or endorse the Code for Responsible Investing in South Africa, which requires public disclosure of SRI
strategies. Kenya and Nigeria have recently adopted stewardship and corporate governance codes that may
influence better disclosure in the future.
Negative screening is the dominant form of screening across the three countries. Private equity and venture
capital firms are guided primarily by the International Finance Corporation performance standards, particularly
in screening out “sin” stocks. Religious based screening is a small but growing practice among asset managers
in Nigeria and South Africa, where Islamic finance is developing. These countries have established Sharia-compliant indices on their stock exchanges. Investments in Sharia-compliant portfolios were estimated at $4 billion
and $28 million in South Africa and Nigeria, respectively.

Overseas investors continue to be the most prominent sustainable investment investors in the region,
representing $18.2 billion in assets. The largest markets with global investors were Hong Kong, with
$12.9 billion in assets, and Singapore, with $4.3 billion. In emerging markets like China and South Korea,
regional and local investors are the main investors in sustainable assets.
As China continues to open up its market, a change could occur in this dynamic. In July 2015, the Chinese
government announced it would allow 100 percent foreign-owned fund managers to operate under theirown names and market their own products to local clients.
The data collected for Asia’s responsible investing review also includes assets managed consistently
with Islamic law or Sharia principles. Of the total sustainable investment assets in 2016, 34 percent of theassets ($17.9 billion) are Sharia-compliant, with annual growth of Sharia-compliant assets since 2014 of
3 percent.

2016 Global Sustainable Investment Review 17

JapanAccording to the Japan Sustainable Investment Forum (JSIF), the total sustainable investment market in
Japan is measured at $473.6 billion, up from $7 billion during the last review. At first glance, this growthappears to be staggering, but can be explained by new survey data and a number of significant changes tothe sustainable investment market in Japan since 2014.
Until recently, the scope of JSIF’s reporting was limited to publicly available figures pertaining to SRI
investment trusts and social impact bonds. Disclosures concerning sustainable investment by institutional
investors, including pension funds, were limited, and balances were not publicized. As a result, JSIF was
not able to reflect many of these investments in its calculations. However, in 2015, JSIF undertook a survey
for the first time of institutional asset owners.
But the surge in Japan’s sustainable investing market is not only due to better reporting; it also reflects major
developments that have promoted responsible investment. In February 2014, Japan’s first Stewardship
Code was established, encouraging institutional investors to participate in constructive engagement withthe companies in which they invest. Although the principles are voluntary, 201 institutional investors had
adopted them as of December 2015. In June 2015, the Corporate Governance Code, which sets rules
concerning whistle-blowing, disclosure and stakeholders’ rights, was announced. Furthermore, the world’s
largest pension fund, the Japanese Government Pension Investment Fund (GPIF), became a PRI signatory.
JSIF conducted two surveys focused on sustainable investment, first at the end of 2015 and again in thefall of 2016. In the first survey, 26 respondents (93 percent) reported adoption of the Japanese Stewardship
Code. Twenty-seven respondents (96 percent) indicated that they were engaged in sustainable investment.
Combining the data from both surveys, JSIF found that corporate engagement and shareholder action isthe dominant strategy at $289.6 billion, applying to 61 percent of SRI assets. This number includes bothgeneral engagement/use of voting at $130.3 billion and ESG-related engagement/use of voting at $159.3
billion. ESG integration ($120.0 billion) is the second biggest approach, with 25 percent of SRI assets.
Norms-based screening ($56.0 billion) and positive/best-in-class screening ($25.1 billion) follow, with
12 percent and 5 percent, respectively.

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2016 Global Sustainable Investment Review

Spotlight on Green Finance
The greenhouse gas reduction goals pledged by the world’s nations at the 2015 conference of parties to theUnited Nations Climate Change Conference, also referred to as COP21, is certain to spur further interest
and growth in green finance to aid carbon reduction and other environmental initiatives.
The nonprofit Climate Bonds Initiative (CBI) tracks climate bond data across countries and maintains apublic list of labelled green bonds. The CBI categorizes its data into two main categories. Labelled green
bonds are bonds “with use of proceeds defined and labelled as green.”4 Unlabeled climate-aligned
bonds, on the other hand, “do not carry a green label.”5 Together, these two categories comprise theclimate-aligned bond universe, which is $694 billion globally, according to its latest State of the Market
report, issued in mid-2016.
What follows are highlights of the green finance markets in China, the United States, Europe and Canada
and the national and sub-national policies that are shaping them.

China

China, the world’s largest emitter of greenhouse gases, agreed at COP 21 to reduce its carbon intensity—
its greenhouse gas emissions in relation to GDP—60 to 65 percent by 2030 from the level in 2005. The
People’s Bank of China estimates that this goal will require annual investments of $320 billion to $640 billion
annually, of which 85 percent or more will have to be supplied by the private sector. The decarbonization
goals are urgent for domestic political reasons as well, as China’s rapid and coal-intensive economic growth
has caused staggering levels of air pollution that have compromised public health. As part of China’s
presidency of the G20 in 2016, the government co-hosted, along with the United Kingdom, a Green FinanceStudy Group that gathered data and experience from G20 members and international institutions on how tomobilize private capital for environmental initiatives.
After issuing its first corporate green bond only in 2015, China has now become the world’s largest issuer ofclimate-aligned bonds, according to CBI, with $220 billion in issuances. The bulk of its unlabelled climatealigned bonds are for the railway and transport sector. It is also developing a labeled green bond market
and turning to certification firms such as KPMG, EY and Trucost for assistance.

United States

The United States, the world’s second largest emitter of greenhouse gases, pledged to reduce its greenhousegas emissions by 26–28 percent by 2025 at the UN Climate Summit.
To help meet those targets, the Obama administration developed the Clean Power Plan to set state-by-state
standards to reduce carbon dioxide emissions from electric power plants 32 percent from 2005 levels
by 2030.6 Although the regulations are on hold as they face legal battles from pro-fossil fuel states andbusinesses and hostility from the Trump administration, other federal policies to galvanize renewableenergy production remain in place. In particular, the US Congress in December 2015 passed a budget that
included a multi-year extension of solar and wind tax credits, as well as one-year extensions for various
other renewable energies such as geothermal and landfill gas.
4. Climate Bonds Initiative, Bonds and Climate Change: The State of the Market in 2016 (2016), 2. Available at https://www.climatebonds.net/files/files/
CBI%20State%20of%20the%20Market%202016%20A3.pdf.
5. Ibid.
6. Environmental Protection Agency, FACT SHEET: Clean Power Plan by the Numbers. Accessed January 19, 2017, https://www.epa.gov/cleanpowerplan/fact-sheet-clean-power-plan-numbers.

2016 Global Sustainable Investment Review 19

The multi-year nature of the tax credits has provided predictability to the solar and wind industries in the
United States. According to Bloomberg New Energy Finance (BNEF), US clean energy investment trended
upward between 2013 and 2015, but declined by 7 percent to $58.6 billion in 2016.7 BNEF explains that
this was due to “less pressure” to push through investments after the extension of the tax credits.8 It has
estimated that the extensions could lead to $73 billion in new investment and give more than eight million
households access to affordable clean energy over time.9
Moving to the state level, some states passed referenda in 2016 supporting green finance: Florida approved
property tax exemptions for renewable energy devices, and Rhode Island approved green economy bonds.
Moreover, as of year-end 2016, 29 states had renewable portfolio standards, which require utilities to sell a
specific percentage or amount of electricity generated from renewable sources.10 California and New York
have requirements of meeting 50 percent of their power needs with clean energy by 2030.11
According to CBI, the United States is the second largest issuing country in the climate-aligned bonduniverse with $111 billion, or 16 percent of the global total. It is also the largest issuing country of labelledgreen bonds. Two important sectors in the US market are renewable energy and water: 40 percent of thewater-themed investments tracked by CBI are from US issuers, and US issuers have raised $28 billion for
200 renewable energy initiatives.
CBI identified $30 billion in climate-aligned US municipal bonds, of which $4.7 billion were issued just in
2015. Top climate-aligned muni bonds issuers are New York, California and Massachusetts, and bonds areprimarily going towards transport and water projects. CBI notes that the main reason for the popularity ofthe muni bond market in the United States is because bonds are “frequently structured to give tax breaks
to bond buyers.”12
Another source of US green finance is alternative investments. The US SIF Foundation Report on US
Sustainable, Responsible and Impact Investing Trends 2016 identified 354 alternative investment funds with$197 billion in assets that considered environmental criteria in portfolio selection at year-end 2015.
Among the private equity and venture capital funds in this group, the top specific ESG issue was clean tech,with 112 funds identified with $80 billion in assets. Fifty-six funds with $74 billion in assets incorporated
climate change and carbon emissions in their investment process. The primary factors considered byproperty funds were all “green” related: green building and smart growth ($60 billion), climate change andcarbon emissions ($47 billion) and pollution and toxics ($39 billion).

EuropeThe European Union has committed to cut greenhouse gas emissions by at least 40 percent by 2030 while
modernizing the EU’s economy and delivering on jobs and growth for all European citizens. To that end, inNovember 2016, the European Commission presented a package of measures, under the denomination of“Clean Energy for All Europeans,” to keep the European Union competitive. This package finds that an extra
177 billion is needed in Europe annually from 2021 onwards to reach the 2030 climate and energy goals.
New innovative funding and investment mechanisms will be essential to achieve this.
7. 
See: Bloomberg New Energy Finance, Global Trends in Clean Energy Investment (2017). Available at https://about.bnef.com/cleanenergy-investment/ and “Global Clean Energy Investment Fell 18% in 2016 with Slowdown in China,” Greentech Media, January 12, 2017,https://www.greentechmedia.com/articles/read/global-clean-energy-investment-dropped-18-in-2016-with-slowdown-from-china.
8. “Global Clean Energy Investment Fell 18% in 2016 with Slowdown in China,” Greentech Media, January 12, 2017, https://www.greentechmedia.com/
articles/read/global-clean-energy-investment-dropped-18-in-2016-with-slowdown-from-china.
9. “What Just Happened in Solar Is a Bigger Deal Than Oil Exports,” Bloomberg, December 17, 2015, https://www.bloomberg.com/news/articles/201512-17/what-just-happened-to-solar-and-wind-is-a-really-big-deal.
10. National Conference of State Legislatures, State Renewable Portfolio Standards and Goals. December 28, 2016, http://www.ncsl.org/research/energy/renewable-portfolio-standards.aspx.
11. Ibid.
12. Ibid, 16.

202016 Global Sustainable Investment Review

Currently, the United Kingdom and France are the third and fourth largest issuers of climate-aligned bonds,
according to CBI, each with 9 percent of the issuances in 2016. Somewhat further behind is Germany, with
2 percent of the climate-aligned bond universe. Altogether, Western Europe accounted for $195 billion inclimate-aligned issuances. For France and the United Kingdom, climate-aligned issuances are centered on
financing rail networks; in Germany, renewable energy projects predominate.
In light of the global commitment to shift to a low carbon economy, the European green bond market islikely to continue to grow in the years to come, attracting more diverse issuers and investors. The EU
market has experienced participants and increasing political support from the EU institutions. The Europe
2020 Project Bond Initiative led by the European Investment Bank with the European Commission supports
capital market financing of projects and promotes increasing the use of bond financing at the project level.
This initiative aims to increase the market share of asset-based securities in the EU. Nevertheless, the green
bond market still only constitutes a very small share (around 0.13 percent) of the total EU bond market. The
market is particularly strong not only in the UK, France and Germany, but also in the Nordic countries, theNetherlands and Switzerland.

CanadaAt COP 21, the Canadian government committed to reduce the country’s greenhouse gas emissions by 30
percent below 2005 levels by 2030. Through its 2016 budget, the federal government has set aside funding
to invest in renewed infrastructure and climate mitigation efforts and to support clean innovation, jobs andgrowth.
The federal government has committed to green bond issuances as well. Prime Minister Justin Trudeau’smandate letter to the Minister of Infrastructure and Communities directed him to work with the Minister ofFinance to prepare for “the launch of a new Canadian Green Bond.” At the same time, several provincial
governments have also indicated commitments to low-carbon investments.
Canada’s climate-aligned bond universe has grown to $27 billion, or 4 percent of the world total, according
to CBI, making it the fifth largest issuer after France and the United Kingdom. Of all the thematic
areas where proceeds are invested, energy is the largest single theme, accounting for 61 percent of theclimate-aligned universe. Transport is the second largest theme, accounting for 28 percent.
When Export Development Canada (EDC) issued its first green bond in January 2014, the AAA $300 million
issuance sold out in 15 minutes and was oversubscribed by $200 million. In December 2015, the EDC
issued a second green bond of $300 million.
The Province of Ontario successfully launched a green bond program in October 2014 with an inaugural
green bond of C$500 million. In January 2016, Ontario launched a second green bond of C$750 million, andhas recently announced plans to issue its third green bond during the 2017 fiscal year.
In 2015, Canada’s first green retail bond was issued, for C$300,000. CoPower, the issuer, is using thefunds raised to finance community-scale clean energy projects across North America. Retail bonds like
CoPower and SolarShare (a renewable energy co-op) are significant in their ability to raise awareness amongcommunities and individuals who might not otherwise have exposure to green investing.

Australia and New Zealand

The last two years have seen a distinct shift in Australasia from talking about investment opportunities ingreen finance to capital moving into green finance opportunities. After a number of years during whichinvestors in this region undertook detailed assessments of their environmental exposures and portfolio
carbon footprints, capital is now starting to flow to green finance on a scale that is rapidly rising.

2016 Global Sustainable Investment Review 21

Investments in sustainability themed vehicles tripled from 2014 to 2015 from $AU8 billion to $AU24 billion.
While multiple themes fall under this sustainable investing strategy, what dominates are low carbon
strategies, green property funds, green bonds and sustainable agriculture investments.
The most recent two years have seen high profile allocations of capital being made in green financethat include:•G reen themed bonds: These have been issued by major banks in Australia, by property managers, andby a state government.
•L ow carbon tilting of portfolios: A major superfund in Australia implemented a low carbon tilt across its fullinternational equities allocation.
•P rivate equity allocations: Major asset owners in the region have been putting in place more active private
equity strategies with explicit targets for low carbon or clean energy companies that offer renewableenergy or energy efficiency solutions.
•G reen property funds: Australian’s listed property groups have long been leaders in managing ESG
issues in the built environment, and more property funds (largely commercial real estate) are positioning
themselves as green themed funds where assets are managed to a very high environmental standard.
•S ustainable agriculture: As more large institutional investors are focusing on the opportunities in agriculture,
the ESG and sustainability related risks and opportunities are starting to become key features of investment
deals across agriculture, horticulture and forestry.
• Impact investment products: The first water bond was recently issued, and there are now clean energy
venture capital impact funds.
Some key institutions have been integral in unlocking capital flows into environmental finance, most
specifically the government backed, $AU10 billion Clean Energy Finance Corporation, which is tasked withco-investing with private investors into low carbon assets and businesses, with a model very similar to the
UK’s Green Investment Bank.

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2016 Global Sustainable Investment Review

Conclusion
In almost all the markets represented in this report, sustainable investing has grown in both absolute andrelative terms in the two years since the beginning of 2014. As a result, sustainable investing represents
a significant share of the market not only in Europe and Australia, where it accounts for approximately 50
percent of their professionally managed assets, but also in the United States and Canada, where its shareof the market ranges from 22 to 38 percent. Thanks to increased reporting from Japan, more information isavailable on a broader range of sustainable investing practitioners.
The global growth in sustainable investing demonstrates the increasing demand among investors—both
institutional and retail—for greater disclosure and consideration of ESG issues. Several GSIA members
report that the consideration of fiduciary duty has been an important driver for sustainable investing,indicating that SRI is becoming more accepted by a wider audience than in years past.
Concern over climate change has also been a driving force, particularly in the wake of the Paris Agreement.
New green financing products have appeared, and climate-aligned bonds are continuing to show strong
demand. New markets such as China are contributing to this rise as well.
Finally, pension funds around the world are demonstrating that they view sustainable investing as criticalto long-term investing and risk mitigation. Often comprising the largest percentage of institutional assets intheir region, superannuation funds and pension funds are increasingly requesting ESG integration in theirinvestments, and many are becoming signatories to the Principles for Responsible Investment.

2016 Global Sustainable Investment Review 23

Appendix 1: Methodology and Data
Each region covered by this report uses a slightly different method to collect data for its respective regional
report. The consolidation made in this report is made on a best effort basis, but some regional inconsistencies may remain, notably in impact investing. All 2016 assets are reported as of December 31, 2015, except
for Japan which reports as of March 31, 2016, and currencies are converted to US dollars at the exchange
rate prevailing on December 31, 2015, for comparability. Historical 2014 data are reported as of December
31, 2013, except for Japan which is reported as of September 30, 2014. The 2014 asset data (unlessotherwise specified) have also been converted into US dollars at the exchange rate prevailing on December
31, 2015, in order to avoid introducing currency exchange rate trends into the calculations. Readers should
consult each regional report for more detail on data and data collection methods.

EuropeData collection for Eurosif’s European study was conducted using an Excel-based questionnaire including
both quantitative and qualitative questions, and was sent to key SRI market participants including asset
managers, banks and asset owners (pension funds, universities, foundations, state owned players andinsurance companies). The study covers 13 distinct markets: Austria, Belgium, Denmark, Finland, France,
Germany, Italy, Netherlands, Poland, Spain, Sweden, Switzerland and the United Kingdom. In total, 278
asset managers and asset owners with combined assets under management of $20 trillion participatedin the survey, representing market coverage of 81 percent. In a limited number of cases where survey
responses from key industry players were not received, Eurosif and the national SIFs were able to enhancethe data sample by using publicly available information.
The 2016 data used in this report is slightly different than what is reported in the 2014 Review, due to achange in how ESG integration assets were measured. In 2014, ESG integration included three categories:
1) ESG research and analysis made available to mainstream analysts and fund managers; 2) systematicconsideration/inclusion of ESG research/analyses in financial ratings/valuations by analysts and fundmanagers; and 3) mandatory investment constraints based on financial ratings/valuations derived from
ESG research/analyses. In 2016, Eurosif removed the first category from its 2016 measure of European
ESG integration assets and therefore from its overall total of European SRI assets. However, it was notpossible to recalculate total European SRI assets for 2014 based on the revised definition of ESG integration;
therefore, this report used the 2014 SRI total inclusive of the prior definition of integration. More detail on
Eurosif’s current methodology is available in the European SRI Study 2016.

United States

In the United States, the US SIF Foundation, from May through July 2016, sent a confidential, personalized
survey link by email to 512 investment management firms and 1,144 institutional asset owners identified inprevious surveys as practicing sustainable investing strategies or believed to be new entrants to sustainable
investing practice. Survey recipients were asked to detail whether they considered ESG issues in investment
analysis and portfolio selection, to list the issues considered, and to report the value of the US-domiciled
assets affected as of December 31, 2015. They were also asked to report their total US-domiciled assets
as of year-end 2015 and whether they filed shareholder resolutions or engaged in other shareholder
engagement activities. The research team also collected additional data from public and third-party sources.
In total, the US SIF Foundation research team researched 797 money managers and 1,660 institutional
investors. Of this universe, it identified 477 institutional investors and 300 managers that incorporate ESG
criteria in investment analysis or portfolio selection. It also identified a somewhat overlapping group of 225
institutional investors or money managers that filed or co-filed shareholder resolutions on ESG issues. More
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2016 Global Sustainable Investment Review

detail on the methodology is available in the Report on US Sustainable, Responsible and Impact Investing
Trends 2016, available from the US SIF Foundation website.

CanadaIn Canada, the Responsible Investment Association contacted asset management firms directly, requesting
information on sustainable investing assets under management, effective December 31, 2015. RIA emailed
survey questionnaires to participants, and followed up by telephone. The survey results were combined withpublicly available data on retail sustainable investing funds compiled by the RIA. Data on impact investing
was obtained from a survey of community investment providers across Canada and was combined withother publicly available information and other data. Pension fund assets were gathered from publicly
available sources combined with interviews with fund representatives. More detail on the methodology isavailable in the 2016 Canadian Responsible Investment Trends Report.

Australia and New Zealand

In Australia and New Zealand, the Responsible Investment Association Australasia (RIAA) undertook asurvey of 69 fund managers, superannuation funds, financial advisers, banks and community investment
managers to collect data as of December 31, 2015. Primary data was then collated along with data froma range of other sources. Morningstar provided information on total assets under management and theaverage performance of certain managed fund categories. Where survey responses were not received,
public information was used as available. More detail on the methodology is available in the Responsible
Investment Benchmark Report 2016 Australia and Responsible Investment Benchmark Report 2016 New
Zealand, both available on the RIAA website.

Asia ex JapanAn independent consultant collected and analyzed data on Asia’s sustainable assets from 2013 to 2015.
Data was collected using Bloomberg Professional Service, Thomson Reuters, Eikon and other publicallyavailable sources. Market data for Korea was provided by KoSIF. Research was conducted on 13 markets:
Bangladesh, China, Hong Kong, India, Indonesia, Malaysia, Pakistan, Philippines, Singapore, South Korea,
Taiwan, Thailand and Vietnam. Sustainable investments were categorized into one of the seven strategies
defined and used by the Global Sustainable Investment Alliance. Assets were categorized according to thedominant strategy in order to avoid double counting.

Japan

The Japan Sustainable Investment Forum (JSIF) undertook two surveys to provide the data included inthis report. The first survey took place from November to December 2015; 59 institutions received thesurvey and 28 responded. The second survey took place from September to October 2016, and resulted
in 31 responses. One key difference from the 2014 report is that the 2015 survey was sent to institutional
investors, while previously the report relied only on information from public retail funds. The 2015 survey
also included questions on corporate engagement, which was not previously tracked.

2016 Global Sustainable Investment Review 25

Appendix 2: Glossary
Best-in-Class/Positive screening: Investment in sectors, companies or projects selected from a defined
universe for positive ESG performance relative to industry peers.
Corporate engagement and shareholder action: Employing shareholder power to influence corporate
behavior through direct corporate engagement (i.e. communicating with senior management and/or boardsof companies), filing or co-filing shareholder proposals, and proxy voting that is guided by comprehensive
ESG guidelines.
ESG: Environment, social and governance—refers to sustainable investment criteria used alongside
traditional financial criteria in managing and selecting investments.
Institutional investors: Organizations that pool large sums of money, including pension funds, insurancecompanies, investment companies, foundations, charities, public authorities and universities.
ESG integration: Explicit consideration of environmental, social and governance factors in the investment
decision-making process.
Impact investing: Targeted investments, typically made in private markets, aimed at solving social orenvironmental problems. Impact investing includes community investing, where capital is specificallydirected to traditionally underserved individuals or communities, or financing that is provided to businesses
with a clear social or environmental purpose.
Norms-based screening: Screening of investments based on compliance with international norms andstandards such as those issued by OECD, ILO, UN and UNICEF; may include exclusions of investments thatare not in compliance with norms or standards or over and underweighting.
Sustainable investment: An approach to investment where environmental, social or governance factors, in
combination with financial considerations, guide the selection and management of investments.
SRI: A generic term covering sustainable, responsible, socially responsible, ethical, environmental, social
investments and any other investment process that incorporates environmental, social and governanceissues.
Sustainability themed investment: Strategy that addresses specific sustainability issues such as climatechange, food, water, renewable energy/clean technology and agriculture.

26

2016 Global Sustainable Investment Review

Appendix 3: Data Table				
Australia
Asia
2014 $Bn
Europe United States Canada
New Zealand ex Japan
$7,470.81$4,441.00$117.86$129.04$23.41——$12,046.23

Corporate engagement andshareholder action$564.97$3,570.76$1,716.00$630.90

$0.02

$1.16

—

$5,918.84$385.37$501.00

$2.11

—

$1.73

—

$890.21$22.09$69.00

$1.65

$0.00

Norms-based screening

Positive/best-in-class screening
Sustainability themed investing
Impact/community investing
Total$2,071.04$3,960.84$64.27$10,774.61$4,739.00—$410.37$13.86$30.00$35.43$3.86$6,572.00$728.98$148.42$2.98$16.55GlobalNegative/exclusionary screening
ESG integration

—

Japan

—

—

$2.09

$1.81

$44.94

$6.97

$5.16

$7,527.46$4,385.06$137.47$100.88$18,275.93

				Australia
Asia
2016 $Bn
Europe United States Canada
New Zealand ex JapanJapan

GlobalNegative/exclusionary screening$11,064.15$5,811.21$15,023.26

Corporate engagement andshareholder action$2,884.52$18.67$4,654.35

ESG integration

Norms-based screening

Positive/best-in-class-screening
Sustainability themed investing
Impact/community investing
Total$1,051.83—$477.02$18.80$24.48$119.95$2,558.20$862.10—$1.05$289.59$8,365.29$537.78$246.79$219.27—$1.38$25.07$1,030.29$107.18$123.40$5,545.67$158.32—$73.27$589.73$18.91$67.10$17.03$6.25$1,085.97$515.73$52.07

$6.65

$2.72

$0.05

$0.06

$55.96
$8.60

$7.96

$10,369.01$6,210.32$330.56$247.96$22,890.14

				Australia
Asia
Growth 2014–2016
Europe United States Canada
New Zealand ex JapanJapan

GlobalNegative/exclusionary screening

48.1%-19.5%

194.4%

Corporate engagement andshareholder action

30.3%
39.5%

Norms-based screening

Positive/best-in-class-screening

39.3%

40.0%

$8,723.22$347.00$473.57

ESG integration$12,039.57$3,574.64

86.2%

na

269.7%

13.5%

na

24.7%

49.1%

36.6%

na

-8.9%

na

41.3%

-50.7%

10273.0%

na-19.9%

na

15.7%

78.8%

123.2%

22.6%

na		

Sustainability themed investing

146.3%

144.2%

Total

11.7%

32.7%

Impact/community investing385.1%

43.7%

na

4.6%

na

na

na

37.7%

41.6%

89.4%

340.6%

198.3%

374.3%

140.5%

49.0%

247.5%

15.9%

6689.6%

25.2%

64.6%

na

54.1%

145.8%

Note 1: Asia ex Japan 2014 assets are represented in US dollars at the exchange rate as of year-end 2013. All other assets—for both2014 and 2016—for non-US markets are expressed in US dollars at the exchange rate for the applicable non-US currency at year-end
2015. Asia’s 2014 assets were reported in year-end 2013 dollars because no data about the mix of base currencies was available.
Note 2: The Japan 2014 values for SRI strategies of ESG integration, corporate engagement/shareholder action and positive/best-in-classscreening were non-zero in 2014, but because they were so small, and were gathered using a different data collection process, thecalculation of the growth between 2014 and 2016 is not included. Growth between 2014 and 2016 that was not able to be calculated
because data is missing or non-comparable is labeled “na” to represent that that data point is not available.
Note 3: Europe’s 2014 ESG integration number has been adjusted to correspond to the narrower definition Eurosif used in 2016.
Because investors may use more than one SRI strategy, it is unclear how the narrower definition of ESG integration, if employed in2014, would have affected total SRI assets in Europe in 2014. Therefore, the 2014 SRI total is presented here unchanged from the total
presented in the 2014 Review.

2016 Global Sustainable Investment Review 27

Acknowledgements
The Global Sustainable Investment Alliance thanks Kristin Lang, Christi Electris and Andreea Rodinciuc of
the Croatan Institute for collating and analyzing the data from Japan Sustainable Investment Forum, PRI’s
Asia staff and the GSIA member organizations for the 2016 Global Sustainable Investment Review. We thankthese Croatan Institute staff members and Farzana Hoque and Meg Voorhes of US SIF for additional writing
contributions on the Review.
RIA Canada: The Canadian research for this report was made possible by IA Clarington Investments, NEI
Investments, OceanRock Investments and RBC.
Eurosif: The European research for this report was made possible with the financial support from Candriam
Investors Group, Degroof Petercam, Mirova Responsible Investing, Northern Trust, OFI Asset Managementand Etica SGR.
PRI: All data and content related to Asia (ex-Japan) was gathered and prepared by Mary Ho of SustainComm
Ltd), with support from the PRI. PRI would also like to thank Karl C.S. Yang, Executive Director, KoSIF, forproviding the market data for South Korea.
US SIF: The US research for this report was made possible by a grant from Wallace Global Fund andfinancial support from Bloomberg, Calvert Investments, Candriam Investors Group, JP Morgan Chase, TIAA,
KKR, MacArthur Foundation, Neuberger Berman, Saturna, Bank of America, BlackRock, CBIS, Community
Capital Management, ImpactUS, Legg Mason Global Asset Management, Morgan Stanley Institute for
Sustainable Investing, Sentinel Investments, Trillium Asset Management and Walden Asset Management.
RIAA: The research on Australia and New Zealand for this report was made possible by financial support
from: Australian Ethical, BT Financial Group, Northern Trust Asset Management, New Zealand Super Fundand Teachers Mutual Bank.

28

2016 Global Sustainable Investment Review

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