£22 trillion in Good investment is just the beginning

Written by Rebecca Jones on 9th Apr 2019

The problem with big numbers, is that – to must of us, they don’t mean much. While we might all agree that £22 trillion is a lot of money, for example, few of us can imagine what it looks like. We can agree, though, that it’s a fair wedge.

And so we can celebrate the fact that £22 trillion is now, according to The Global Sustainable Investment Alliance (GSIA), the estimated pile of cash sitting in sustainable strategies across the globe. We can also cheer for the fact that it is up 34 per cent on 2016 – a boom that makes sustainability one of the fastest growing investment strategies in the world.

Even more reason to jump for joy comes from where and how this money is being invested, with the GSIA reporting that the biggest area of growth is money into sustainability themed strategies (i.e. genuinely Good companies), with assets in this area growing an incredible 270 per cent from £210 billion in 2016 to £778 billion last year.

This compares to a decline of 24 per cent in so-called ‘norms based’ screening, which involves assessing companies based on minimum standards of business practice issued by official bodies like the United Nations – (i.e. ticking boxes).

Indeed, according to the GSIA, the desire for real, genuine sustainability is strong among global investors, with numerous respondents to the report (the biggest and most comprehensive of its kind) from Europe, the US, Canada, Australasia and Japan all citing increased client demand as the main reason behind new money flows.

Impact explosion

Perhaps more so than other areas, this growing demand for REAL Good investment is demonstrated by the growth in the impact assets, which have nearly doubled from £190 billion in 2016 to £339 billion last year.

While still the smallest area of the global market, the GSIA describes impact – which it defines as ‘targeted investments aimed at solving social or environmental problems’ – as the most vibrant areas of growth. In the US impact assets swelled by 138 per cent between 2016 and 2018 – consolidating America’s position as the global impact leader (66 per cent of all impact assets are in the US).

Similarly Australia and New Zealand saw a 116 per cent spike in impact – the greenest area of investment – while Canada’s impact share is up 60 per cent.

This surge in impact is echoed in the latest market sizing report from The Global Impact Investing Network, which estimates the total global impact market a shade higher than the GSIA at close £338 billion of assets under management.

For your comprehensive guide to making an impact with your money, check out Good With Money’s Guide to Impact Investing

It’s coming from US!

Perhaps the most exciting part of all of this, though is WHERE this money is coming from. Since the dawn of investment time, the majority of all money in the markets has been put there by ‘institutional’ investors (i.e. the mega banks and insurers that run pension funds like UBS, Allianz and JP Morgan), giving us little people very little say.

This is still, on the whole, true, with the vast majority of assets in the sustainable space alone run by insti’s. HOWEVER: this is changing – and fast. In two short years alone, the percentage of retail investors (i.e. you and me) in the space has shot up from 18 per cent to 25 per cent – an incredible shift in a dial that has historically been almost impossible to budge.

This is hugely important as, going back to our big numbers conundrum, as good as all of this news is – it isn’t enough. Nope: while £22 trillion is a lot of moola (if we shared it between everyone in the UK we’d all get a tasty £333,000, for example), it is a pin prick in terms of global investment assets.

A reliable figure on the size of the global investment market is hard to come by, with estimates for the institutional space alone standing at £100 trillion (shared between every Briton, that’s £1.5 million each). And so, at best, sustainable investment is likely to accounts for less than a fifth of all money in markets.

Turning the money ship around

There is one way and one way only this is going to change. If you, me, and Mavis next door sit down at our electric boxes and move our money where we want it to be.

Pension and sovereign wealth funds (think Norway and Saudi for the latter) – which control the vast majority of the world’s money, are doing alright (especially Norway, God bless the Scandis) but mostly they are in oil and gas, tobacco, arms, big banks, big pharma, questionable consumer giants and more.

And this means that most of us – because their money is OUR money – are in all of the above. Yep: if you have a company pension fund and you’ve never looked at it, you can be 99 per cent sure you are a British American Tobacco, Shell and HSBC shareholder. 

As the GSIA report shows, though, we are all starting to do something about this. Increasingly, people are discovering the power they have with their money and starting to use it to make a difference. Whether that be through moving their pension fund to switching to an ethical bank or insurer, to making a small £5 or £50 investment into a grassroots impact project.

According to the UN, there is a £2 trillion annual investment gap in the amount needed to achieve the Sustainable Development Goals – which include the eradication of poverty, clean energy, clean air and access to education and healthcare for all – by 2020.

Again, this is a really big number; however, if we share this out between everyone in Europe, it breaks down to £2,700 each. Over a year, that’s £7.40 a day. If we get the Americans involved – and we know how they love a bit of impact – that falls to just £5 per day. £5 per day to solve all of the world’s problems – while making a healthy, cash busting return for ourselves.

Mass global change is not only possible: it’s insanely achievable. And we can do it, together, from our laptops, today.

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