The assets under management (AuM) in responsible investment funds more than trebled in size in the ten years between 2012 and 2022, according to recently published research.
Analysis from the CFA Institute found that AuM rose from US$2,215.6 billion to $5,974 billion in that time.
However, the likelihood of this pattern repeating over the course of the next ten years may be dependent on regulation.
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According to the CFA report, a more complex regulatory environment may adversely affect future growth by potentially deterring increased investment in the sector.
The report also found that despite the growth over the decade, responsible investments still only account for around 15% of overall market share.
When it comes to preferences within the responsible investment sector, negative screening is by far the most popular strategy, as used by three-quarters (72%) of investors.
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In contrast, impact investing makes up between 10-15% of both retail and institutional fund assets.
The report also examined the differences between the US and Europe in terms of the split between retail and institutional investors.
While retail investments account for 65% of responsible fund AuM, the opposite is the case in the US with institutional investors contributing 70% of AuM.
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The research also found differences in the motivations for retail and institutional investors. While the former are attracted to funds that align with their personal values and beliefs, the latter are more driven by the need for risk-adjusted returns.
“Institutional investors across markets are facing an increasingly complex regulatory and political environment, potentially affecting the further growth of institutional assets and deterring their further participation,” said Rhodri Preece, CFA, senior head of research at the CFA Institute.
“However, younger investors will likely exert a growing influence on product developments in the coming years as their personal values and preferences manifest in investment strategies such as negative screening and thematic products.”
