Sustainable Finance

As we approach the third decade of the new millennium, rapid changes are engulfing the investment world. In the last 36 months we have seen assets under management with ESG managers(1) increase to nearly $23 trillion globally, a near doubling in the U.S. alone to over $9 trillion. At the same time we have seen a huge shift of assets from actively managed investments into so-called passive, indexed vehicles with nearly half of all equity funds investments in the U.S. now held in passive strategies.(2)

Turning to public funds, we are likewise seeing dramatic shifts, and generally, not positive ones. The five largest U.S. municipal bankruptcies on record have all occurred nearly every year since 2011. The most recent being Puerto Rico this year, which exceeded the prior record set by Detroit by nearly four-fold.  All but one were directly related to pension problems.(3)  The implications for municipal bond investors are obvious, as Illinois recently flirted with becoming the first U.S. state to be downgraded to below investment grade by a bond rating agency.

Investors find themselves at a cross roads. Sustainability itself is taking on a dual meaning in this brave new world: can finance sustain itself into the future, and what impact can it have on society at large?