The Aha Moment: Despite politics and pushback, sustainable investing is blooming

December 23, 2024 at 11:18 AM EST

You may have heard that “ESG” investing (meaning a focus on environmental, social, and governance issues) has been facing pushback, all the more so with the election of Donald Trump. You could be excused for thinking that ESG is a trend that is winding down. But there’s an Aha Moment hiding behind these headlines: sustainable investing is getting stronger.

Last week, the US Sustainable Investment Forum (US SIF) released its biannual research report, called Sustainable Investing Trends 2024/2025. The report shows that while sustainable investing approaches remain a subset of the wider investing universe, it’s an area that has grown, evolved and become increasingly influential.

Size and strength

According to US SIF data, approximately 12% of all U.S. investment dollars is currently in products that are identified or marketed as sustainable. While 12% may seem modest, that represents $6.5 trillion in assets. Sustainability-minded investors bring both commitment and meaningful resources to the table.

But assets under management are only one way to measure growth. As the Trends report suggests, the real story lies beneath the top line figures – notably in the evidence showing how the sustainable investing market has matured in the past six years.

To summarize their findings: sustainable forms of investing have evolved from an attractive idea to a substantive reality, driven by three key changes.

Better ESG data – and better measurement and reporting of ESG impacts – are providing a more robust foundation for sustainable investment strategies.
Climate change and other sustainability challenges are driving new legislation in the U.S. and around the world, which is requiring investment managers to have a much better understanding of ESG issues.
New data means new strategies, and sustainability-minded investors have a much broader set of options to choose from.

The Aha Moment: Despite politics and pushback, sustainable investing is blooming

“One of the things that came through quite strongly from the survey is that 73% of the asset managers we spoke to expect the sustainable investing market to grow going forward, said Maria Lettini, CEO for US SIF. “Obviously we’ve seen some negative impact as a result of anti-ESG attacks before the election. But the broader trend is an optimistic, positive drive forward despite those headwinds.”

Good stewards

Traditional investment strategies haven’t always given a warm welcome to ESG data and sustainable approaches – in fact, the Trends report suggests that the term “ESG” may eventually go away altogether. Yet key innovations in the ESG field are beginning to find their way into the traditional fund landscape, albeit under a different name.

One such innovation is company engagement, which has been a key component of many sustainable strategies. Engagement programs require investment managers to make full use of proxy voting and meetings with management. They might use these touchpoints to ask questions about the non-financial aspects of leadership decisions or advocate for changes in corporate policies.

The Trends report finds this effort transforming into “stewardship,” and of the respondents to their survey, 79% now have some kind of documented stewardship policy. Stewardship is a recognition that financial managers have a duty to uncover risks that could harm shareholder interests. Those risks could be financial, but they could also be found in the way a firm approaches energy efficiency or manages its workforce. That is to say, environmental and social considerations.

With sustainable investors, says Lettini, “the drivers are often around creating positive social change, a sense of mission and personal values. But for the more traditional asset managers, the primary concerns are fiduciary duty and responding to client demand.”

Trending up

As the Trends report highlights, there’s still a noticeable amount of greenwashing occurring in the investment sphere, and there is a meaningful difference in the level of commitment providers truly have toward sustainability.

Just because a fund has a stewardship policy, for example, doesn’t mean it’s doing much stewarding. So it’s still incumbent on sustainability-minded investors to look under the hood and choose investment managers who demonstrate real commitment to their strategies.

But the good news for investors is, regardless of what you may have heard, sustainability and the ESG data that underpins it has only gotten stronger and more influential. So you will still be able to find investment options that fit your Aha Moments – and that will endure in any political climate.

More of The Aha Moment: Surprise! ESG is all about the data

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The Aha Moment: Despite politics and pushback, sustainable investing is blooming

Size and strength

Good stewards

Trending up

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