Assets managed in environmental, social, and governance (ESG) are growing. Willis Towers Watson’s Thinking Ahead Institute released new research on Monday that showed the largest 500 asset managers increased their positions in ESG by 23.3% in 2018 compared to their overall assets. Client interest in sustainable investing rose 83%.
BlackRock, which has been the largest asset manager since 2009, has almost $6 trillion in assets under management. Vanguard Group holds more than $4.8 trillion, and State Street Global has more than $2.5 trillion. Each has been in the top three list of global asset managers for five years. Fidelity holds more than $2.4 trillion in assets.
Beyond ESG, the Thinking Ahead study reveals several other trends:
- The $91.5 trillion that the 500 managers hold declined 3% from the previous year.
- The median assets under management was $45.6 billion, which rose from $44 billion the previous year.
- Rowe Price joined the list of top 20 asset managers for the first time.
- 57% of assets are in North America, compared with 31% in Europe and 5% in Japan.
The report revealed that the investment industry remains relatively unstable. Nearly half (242) of the names in the 2008 list of global 500 asset managers are not in the 2018 list. Experts attribute this to increased regulatory scrutiny, fee compression, and technology costs. Meanwhile, 81% of fund managers said that they increased resources to technology and data. And 57% of managers surveyed said they had experienced an increase in regulatory oversight.
The results show that early ESG proponents are finally getting their due. Some have been pushing their beliefs for a long time. In 1982, John Streur, CEO of Calvert Research & Management, launched the first mutual fund that avoided any entities doing business in apartheid-era South Africa.
More recently, in 2012, Unilever’s then-CEO Paul Polman made sustainability a core management principle. The company created the Unilever Sustainable Living Plan, an effort to ensure that 100% of the material used in the company’s products were sustainable, leading to an increase in revenue and lower carbon footprint. And in 2018, BlackRock CEO Larry Fink said at the The New York Times Dealbook conference that within five years, all investors will use ESG metrics to determine a company’s worth. Last month, Bloomberg introduced new indexes with ESG benchmarks.
Sovereign wealth funds and US-based public pension funds have been early adopters of ESG. The Norwegian Government Pension Fund Global has been a pioneer, first turning to socially conscious investing in 2001. The California Public Employees’ Retirement System, the California State Teachers’ Retirement System, and the New York State Common Retirement Fund have incorporated ESG into their investment practices.