GISA reports 50% increase in funds adopting sustainable investment approach over past two years
The sustainable investment industry is on a “rapid evolutionary trajectory” with assets in funds using responsible or sustainable investment approaches increasing by $5.5trn – or almost 50% – over the past two years, according to data from the Global Sustainable Investment Alliance (GSIA) and Morningstar.
The latest biennial Global Sustainable Investment Review, published by GSIA during COP30, found despite a landscape characterised by volatility and fragmentation over the past 24 months, there has been a steep rise in investment allocated to the clean energy sector along with data showing the green economy is the second fastest growing industry globally. The report stated: “There are signs that a sustainable economic transition is underway.”
See more: PA Future coverage of COP30 so far
James Alexander, chair of the GSIA and CEO of the UK Sustainable Investment and Finance Association (UKSIF), said: “This report demonstrates that the sustainable investment industry is on a rapid evolutionary trajectory, from a highly specialised field to market-wide consideration. The record growth of the green economy highlights how quickly the sustainable transition is progressing.”
The report acknowledges difficulties drawing on traditional sources of data, such as global fund manager surveys, which accounted for the vast majority of $124trn of assets under management covered in previous GSIR reports. To bridge this gap, GISA included data from Morningstar, but said this limited the scope of analysis to legal fund public disclosures made by asset managers, and therefore significantly reducing the volume of assets covered (a greater than 50% reduction). Despite the differences in data sources and volume, the report recognised is a continuation of the trends highlighted in previous GSIR reports, including the rise of stewardship and engagement and increasing adoption of responsible and sustainable investment approaches, particularly in markets where regulations are more developed.
See also: COP30: Sustainable investors’ wishlist
The value of fund assets using a responsible or sustainable investment approach has reached $16.7trn.
Hortense Bioy (pictured), head of sustainable investing research at Morningstar, commented: “The global growth of nearly 50% in the adoption of sustainable investment approaches over the past two years is striking, underscoring the continued mainstreaming of environmental and social considerations in investment processes. This trend is most pronounced in regions where regulation has enhanced transparency, notably Europe, Australia and Canada.
“It’s also important to highlight the pivotal role of corporate engagement and stewardship in sustainable investing. These practices consistently emerge as the preferred tools for investors seeking to incorporate sustainability issues in their decisions and influence corporate behaviour.”
Despite this progress, the report highlighted the hurdles including a weakening political consensus on climate policy, which has the capacity to undermine progress. The report said: “In the absence of government interventions to reshape the global economy onto a sustainable trajectory, capital will remain incentivised to exacerbate climate change rather than address it.”
GISA’s Alexander added: “There are challenges ahead, particularly concerning the fragmented political consensus on climate policy. Governments across the world must ensure they rapidly implement the policies necessary to attract large volumes of capital into sustainable assets.
“This requires clearer policy direction and stronger collaboration with investors to maintain momentum towards a sustainable global economy.”
Maria Lettini, CEO of the US Sustainable Investment Forum (US SIF), added: “This year’s Global Sustainable Investment Review shows that sustainable investment is still a systemic consideration shaping markets worldwide. Yet the report is also a clear reminder that policy ambition and investor action must move in tandem.
“To achieve a just and lasting transition, governments must create the enabling conditions that direct capital toward real-world impact, strengthening disclosure standards, ensuring regulatory consistency, and fostering trust across borders.
“As COP30 gets underway, it is a pivotal moment to deepen this global collaboration and ensure that the transition to sustainability becomes both irreversible and inclusive.”