Fund Solutions

CFA: Responsible Investment Trebles

Responsible investment funds tripled in size between 2012 and 2022, with assets under management (AUM) increasing from US$2.21 billion to US$5.97 billion, research from the Chartered Financial Analyst (CFA) Institute has shown. The report analysed patterns among retail and institutional investors in Europe, the UK, and the US, putting sustainable funds’ growth in the context of wider industry trends and breaking down findings by fund share class and strategy type. The overall market share of responsible investment funds remained steady at roughly 15%, despite their growth over the 10-year period covered by the research. Responsible funds were dominated by retail investors globally (65% of AUM) as well as in Europe. However, institutional investors have been holding a greater share in the US since 2018 (currently 70% of AUM). A majority of retail investors invest in ESG and responsible investment funds that align with their personal values and beliefs, the research paper noted, whereas most institutional investors do so with the goal of enhancing risk-adjusted returns. Negative screening was the most popular investment strategy for both retail and institutional investors, representing nearly three quarters (72%) of responsible funds. In addition, impact investing accounted for only a small portion of responsible assets – representing between 10% and 15% of institutional and retail responsible fund AUM. “Institutional investors across markets are facing an increasingly complex regulatory and political environment, potentially affecting the further growth of institutional assets and deterring their further participation,” said Rhodri Preece, Senior Head of Research at the CFA Institute. “However, younger investors will likely exert a growing influence on product developments in the coming years as their personal values and preferences manifest in investment strategies such as negative screening and thematic products.”

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