Investors of large funds are increasingly applying ESG screens against ethically questionable companies
An organization that champions sustainable and responsible investing has found that US institutional investors are increasingly screening against securities that are linked to either tobacco or weapons production.
According to new findings by US SIF, US$2.56 trillion of tobacco-related securities have found themselves on the wrong side of ESG screens reported by institutions as of this year, reported The Wall Street Journal. That’s more than twice the US$1.16 trillion that was similarly excluded in 2016.
As for arms-related investments, disclosed restrictions have climbed to US$1.45 trillion of investable assets, representing a 78% jump from $845 billion. Because of those restrictions against weapons and tobacco investing, product-specific restrictions have become the fastest-growing flavour of ESG investment.
The US SIF study found that total assets invested following various ESG principles, with multiple causes and convictions often found in the same portfolio, rose 38% from US$8.7 trillion in 2016 to US$12 trillion in January this year. That amount, which covers money managers and institutional investors, makes up around a quarter of all professionally managed assets in the US.
Institutional investors have also implemented restrictions worth US$1.65 trillion on companies that partake in political campaigning or lobbying. That’s a 65% increase from 2016.
US SIF Director of Research Meg Vorhees told the Journal that it isn’t clear whether insurers and pensions are actually applying more screens or are simply reporting previously undisclosed bans on tobacco and weapons investing. What’s clear is that institutions are signalling their ESG commitments more as investors and stakeholders air their concerns.
Following the mass shootings in Las Vegas and Parkland Florida, which were among the most high-profile examples of gun violence in recent history, “a number of public funds and other institutional investors reviewed their investment portfolios’ weapons holdings and established policies to divest from gun manufacturers,” the study said.
Some of the largest pension funds in the US, including the California’s public employees’ and teachers’ pension funds, Chicago teachers’ pension funds, and New York City’s employee pension funds, have joined the ranks of institutions that are now divesting from arms makers.
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