As a debate rages over a new climate report from the federal government, issues-focused institutional investors also have been expressing their opinion on climate change.
It’s the third-most important consideration for these big investors in asset-weighted terms, ranking behind “conflict risk” and tobacco ties, as shown in the chart below.
That’s according to a new report from US SIF, a group that pushes for greater use of environmental, social and governance factors in investing. The group conducted research on 496 U.S. institutional investors — such as public pension funds, insurance companies KIE, +1.16% and philanthropic foundations — with a total of $5.6 trillion in ESG-related investments.
The “single most prominent ESG criterion” was conflict risk among these investors, said US SIF’s report. This type of investing has to do with avoiding stocks and equity funds linked to governments with poor records on human rights or with a history of fomenting terrorism or other violence. This area saw significant growth in the 1980s, when anti-apartheid campaigners targeted South Africa.
Some $2.97 trillion is affected by investment policies related to conflict risk, followed by $2.56 trillion that’s affected by restrictions covering tobacco. Then climate-change concerns rank third among institutional investors, having an effect on $2.24 trillion.
Tobacco has experienced some of the biggest recent growth as an ESG factor, US SIF’s report said. That 2018 tally of $2.56 trillion represents a 121% rise since 2016.
The avoidance of arms-related investments also has become increasingly popular among institutional investors, as mass shootings continue to make headlines. “Investment restrictions related to weapons now affect just over $1.5 trillion in assets, a 78% increase since 2016,” US SIF’s report said.
Among money managers, climate change is the most important ESG issue in asset-weighted terms, differing from where it ranks for institutional investors. The money-manager assets to which this criterion applied hit $3 trillion in 2018, followed by tobacco at $2.89 trillion and conflict risk at $2.26 trillion, as shown in US SIF’s chart below.
On Friday, the major government report issued by 13 federal agencies said climate change is a threat to Americans’ health and the country’s economic well-being. It suggested that annual losses could reach hundreds of billions of dollars, more than the economic output of some states.
Trump administration critics questioned the timing for the report’s release, saying it was being buried, as it came during the holiday weekend.