Hills Sustainability
21 February 2024 Article

Responsible Investment Funds Build Consistent Market Presence

  1. Jordan Doyle
This report will help investors, firms, and investment professionals in assessing the outlook for responsible investment funds. It demonstrates the key factors and trends shaping the responsible investment fund market in the United States and Europe.
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Report Overview

Responsible investment funds have significantly increased in popularity over the past decade. This research documents the strategy preferences and motives among retail and institutional investors in the United States and Europe for investing in responsible investment funds.

There are a variety of approaches to incorporate environmental, social, and governance factors into the investment process, including screening (positive and negative), portfolio tilts, active ownership, and integration. These trends have implications for the industry, as investment firms and business models are undergoing significant changes in part due to the rising popularity of sustainability-themed investments and an expanded product set.

Understanding the key factors and trends shaping the responsible investment fund market and differences across jurisdictions will enable investors, firms, and investment professionals to better assess the outlook for these funds.

Key takeaways:

  • Total net assets and net inflows into responsible investment funds have been increasing worldwide for the decade ending 31 December 2022.
  • The growth in responsible investment fund assets has only marginally outpaced that of nonresponsible investment fund assets.
  • Globally, retail ownership of responsible investment funds is higher than institutional ownership. In the United States, however, institutional ownership surpassed retail ownership in 2018.
  • Both retail and institutional investors have more assets in negative screening funds than any other type of responsible investment strategy.
  • Institutional investors invest more of their share of assets in positive screening funds than retail investors.

This report also illuminates the complex regulatory environment for responsible investment funds. The regulatory landscape may affect the growth of institutional assets and potentially deter investment firms from further increasing their investments in these products in the coming years.

The growing demand for personalization in the investment process will likely affect the market for responsible investment funds as investors increasingly prefer to invest in products that are tailored to their preferences.

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