According to a report by US SIF Foundation, a trade group for the sustainable investment industry, the U.S. market for ESG products is less than half of the size previously reported. Assets in U.S. sustainable investments fell 51% from $17.1 trillion at the beginning of 2020 to $8.4 trillion at the start of 2022. The difference is mainly due to changes in the methodology used to calculate the numbers and the impending tightening of regulation, according to the trade group. Ahead of new fund labeling rules by the SEC, the foundation noted that asset managers were being “more circumspect in what they consider to be assets that incorporate ESG criteria”, which led to “modest to steep” declines in ESG AUM reported compared to 2020. In addition, the 2022 report made a new distinction between firm and fund-level claims to sustainability. For example, it did not include “The AUM of investors that stated they practice firm-wide ESG integration without providing additional information on specific ESG criteria that are used in decision-making and portfolio construction.” Rather, they only included the assets of investors or vehicles that “incorporate one or more specific ESG criteria, plus the assets of funds which specify that ESG or sustainability is integral to its decision-making or portfolio construction.”
Finsum:Due to impending regulatory changes and a new calculation methodology, the U.S. market for ESG products is less than half of the size previously reported.