In the previous two episodes, we discussed about what sustainable investing is about and why it matters. We also looked at what are the controversies around it and the regulatory updates to address greenwashing. There is almost a consensus amongst the investing fraternity that ESG is now mainstream.

Sample these facts.

As per the US SIF “Trends Report”, Sustainable investment assets in the US amounted to $8.4 Trillion in 2022.

As per a PwC survey ESG assets domiciled in Europe could grow to between $7.8 to $9.5 trillion by 2025 and account for up to 56% of total European mutual fund assets, against 37% at the end of last year. Against that backdrop, almost 72% of European asset managers were willing to halt all non-ESG product launches, with more than 60% planning to do so by the end of 2024. The institutional investors elsewhere too have similar plans, and it is likely that in a few years from now, most of the investment houses shall have their investment products and processes fully integrated with sustainable criteria.

Active ownership is witnessing a whole paradigm shift. As per the US SIF “Trends report” from 2020 through the first half of 2022, 154 institutional investors and 70 investment managers controlling $3 trillion in AUM led or co-led shareholder resolutions on ESG issues. The leading ESG issue raised in shareholder proposals was on ensuring fair workplace practices, and particularly on ending de facto discrimination based on ethnicity and sex.

It is thus imperative for investors to understand the approaches that are available, in order to understand and align their own investing goals.

In this episode, I talk about the below mentioned approaches to sustainable investing (coming to a mutual fund house near you, if not already there) :

1. Exclusionary screening

2. Best in class selection or positive screening

3. ESG integration

4. Thematic investing

5. Impact investing

6. Active ownership or corporate engagement