Sustainable and responsible investment is moving from a ‘niche practice to a systemic consideration’, a new report by the Global Sustainable Investment Alliance (GSIA) has revealed.
According to the GSIA’s seventh biennial Global Sustainable Investment Review, which was published to coincide with COP30 in Brazil, there has a been a ‘renewed effort’ to anchor financial investment within the transition to a net-zero economy, despite the volatile economic and geopolitical landscape.
Economic transition
Over the past two years, a steep increase investment in the green energy sector and fund-level sustainability disclosures, coupled with recent data indicating that the green economy is the second fastest growing industry globally, the report notes ‘signs that a sustainable economic transition is underway’.
At the same time, however, the report cautions that a weakening political consensus on climate policy could undermine recent progress, stating that 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’.
It highlights current concerns over a ‘policymaker investment dilemma’, under which policymakers have placed significant expectations on private capital to finance the transition without fully understanding the nature of investment decisions.
Historically, GSIA’s analysis has drawn on surveys of global fund managers covering around $124 trillion in assets under management, however, this year, due to a lack of available survey data, the review utilises Morningstar’s publicly available fund disclosures, reducing coverage by more than half.
Despite this reduced scope, the trends highlighted in previous GSIR reports, including the rise of stewardship and engagement, along with increased adoption of responsible and sustainable investment approaches, have continued, it said.
‘Market-wide consideration’
“This report demonstrates that the sustainable investment industry is on a rapid evolutionary trajectory, from a highly specialised field to market-wide consideration,” commented James Alexander, chair of the GSIA and CEO of the UK Sustainable Investment and Finance Association (UKSIF). “The record growth of the green economy highlights how quickly the sustainable transition is progressing.
“But 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.”
Regional organisations associated with GSIA, including Eurosif, RIAA, US SIF, and JSIF, contributed insights to the report, with Estelle Parker, co-CEO of Responsible Investment Association Australasia (RIAA), adding that the report indicates that the “economic transition is happening – just not fast enough to mitigate the worst impacts of climate change. To do that, we need government intervention to make sure the policy settings are right.” Read more here.
