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Sustainable Investing Assets Worldwide (2018-2020)

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Sustainable Investing

Sustainable Investing

This infographic is available as a poster.

Sustainable Investing Assets Worldwide (2018-2020)

Sustainable investing is top-of-mind for many investors, but how fast is it actually growing?

Between 2018 and 2020, global sustainable investing assets grew 15% to reach $35.3 trillion. This works out to more than a third of total assets under management.

In this Markets in a Minute from New York Life Investments, we explore the value and growth of sustainable investing assets across five major markets.

What is Sustainable Investing?

Sustainable investing considers environmental, social, and governance (ESG) factors in portfolio selection and management. For the purposes of this data, it is a broad definition that includes seven main approaches:

  • ESG integration
  • Corporate engagement & shareholder action
  • Norms-based screening
  • Negative/exclusionary screening
  • Best-in-class/positive screening
  • Sustainability themed/thematic investing
  • Impact and community investing

In most regions, it is becoming increasingly common to combine several of the above strategies within the same product.

Sustainable Investing Assets by Region

Sustainable investment data comes from five major markets: the U.S., Europe, Japan, Canada, and Australasia. Currencies have been converted to U.S. dollars at the prevailing exchange rate at the day of reporting. We’ve based growth rates on U.S. dollar values.

Here is the value of sustainable investing assets in U.S dollars, sorted by asset amounts in 2020.

Region20182020Growth Rate
United States$12.0T$17.1T42%
Europe$14.1T$12.0T-15%
Japan$2.2T$2.9T32%
Canada$1.7T$2.4T43%
Australasia$734B$906B23%

All 2020 assets are reported as of December 31, 2019 except for Japan which reports as of March 31, 2020. Australasia is Australia and New Zealand. In 2020, Europe includes: Austria, Belgium, Bulgaria, Denmark, France, Germany, Greece, Italy, Spain, Netherlands, Poland, Portugal, Slovenia, Sweden, the UK, Norway, Switzerland, and Liechtenstein.

The U.S. makes up almost half of global sustainable investment assets, and saw the second highest growth rate. One strong theme in the country is racial justice investing. Over 120 investors and organizations signed a call to action for the investment community to dismantle systemic racism and promote racial equity and justice. They plan to achieve this through various actions, such as hiring people of color and financing Black entrepreneurs.

Europe makes up over a third of all sustainable investing assets. The region has seen important regulatory developments, such as:

  • Institutional investors, asset managers, and advisors must report on how they integrate sustainability risks and adverse impacts at the entity level
  • Advisors are required to ask about their clients’ ESG preferences and advise appropriate products

While Europe saw a decline in growth from 2018-2020, this is because the region has changed how they define sustainable investing. Tighter legislation means that some products that previously qualified as sustainable may not meet the new requirements. The goal of the legislation is to create clear standards for sustainable products, promoting trust and easier access for investors.

The Mounting Pressure

Globally, the proportion of sustainable investing assets is growing. In fact, sustainable investments make up 36% of global assets under management, up from 28% in 2016.

Investment professionals say the top drivers of sustainable investing are to help manage investment risks, and because clients demand it. Not only that, the recent Intergovernmental Panel on Climate Change (IPCC) report has reinforced the importance of sustainable investments.

“The climate crisis poses enormous financial risk to investment managers, asset owners and businesses….. The public and private sector must work together to ensure a just and rapid transformation to a net-zero global economy.”
António Guterres, UN Secretary-General

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Markets in a Minute

The Projected Growth of Alternative Assets

Alternative assets — assets beyond stocks and bonds — are projected to grow by 62% from 2020-2025. Here’s which ones may grow the fastest.

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Alternative Assets

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The Projected Growth of Alternative Assets

When it comes to investing, the focus is typically on stocks and bonds. However, in recent years, many investors have turned their attention to another opportunity: alternative assets.

In fact, global assets under management (AUM) in alternatives are projected to grow by 62% from 2020-2025. In this Markets in a Minute from New York Life Investments, we explain what alternative assets are and which categories will see the most growth.

What are Alternative Assets?

Alternative assets are investments that fall outside of the traditional asset classes of stocks, bonds, and cash. They are broken up into the following asset classes:

  • Private equity: Investing in companies that are not publicly traded or listed on a stock exchange. This can also include the acquisition of public companies by a private investment fund or investor.
  • Private debt: Investing in companies in the form of debt as opposed to equity. Private debt is not typically financed by banks, nor traded or issued in an open market.
  • Hedge funds: Largely unregulated funds that can invest across a wide range of asset classes and instruments. These funds aim to ‘hedge’ risk and maximize profits regardless of which direction the market moves through long (buy) or short (sell) positions.
  • Real estate: The acquisition, financing, and ownership of real estate assets by private investment vehicles, funds, or firms. This includes residential, commercial, and industrial properties both at the time of original listing and when being sold between two parties afterwards.
  • Infrastructure: Investment in services and facilities considered essential to the economic development of a society. This includes energy, logistics, telecoms, transportation, utilities, and waste management.
  • Natural resources: Investment in the development, enhancement, or production of various types of natural resources. This includes agriculture, renewable energy, timberland, water, and metals.

In contrast to traditional markets, alternative assets are typically less liquid and less regulated.

Global Growth

According to Preqin, all alternative asset classes will see significant growth in global AUM. Here’s how the projections break down from 2020 to 2025:

 20202021P2022P2023P2024P2025PCAGR
Private equity4.4T$5.1T$5.9T$6.8T$7.9T$9.1T15.6%
Private debt$848B$945B$1.1T$1.2T$1.3T$1.5T11.4%
Hedge funds$3.6T$3.7T$3.8T$4.0T$4.1T$4.3T3.6%
Real estate$1.0T$1.1T$1.1T$1.2T$1.2T$1.2T3.4%
Infrastructure$639B$668B$697B$729B$761B$795B4.5%
Natural resources$211B$222B$233B$245B$258B$271B5.1%
Total$10.7T$11.7T$12.9T$14.1T$15.5T$17.2T9.8%

Private equity will grow the fastest, and will also see the highest growth in dollar terms. In fact, its proportion of alternative assets’ AUM is expected to rise from 41% in 2020 to 53% in 2025. Preqin predicts that this will be due to both strong performance and asset flows, with 79% of surveyed investors planning to increase their allocation to private equity.

Private debt is also expected to see strong growth. With greater risk appetite than banks, private debt funds could be active in emerging technologies such as pharmaceuticals and the remote working industry. These funds take on higher risk in anticipation of higher yield potential, an attractive proposition for investors amid low interest rates in many areas.

Similarly, investors will likely turn to real estate for its yield potential. Long-leased assets usually offer stable cash flows and indexed rents, making them one of the asset classes that may hedge inflation. However, the industry is projected to have the lowest compound annual growth rate, given the uncertainty facing office and retail spaces post COVID-19.

The Opportunities in Alternative Assets

Outside of investments such as liquid alternatives, alternative assets have typically only been accessible to institutional investors. However, recent regulatory changes by the U.S. Security and Exchange Commission (SEC) mean that private markets are opening up to individual investors if they meet certain criteria.

Alternative assets offer a number of compelling opportunities, including portfolio diversification, lower correlation with public markets, and potential outperformance. In fact, research has found that private equity was the best-performing asset class in a public pension portfolio, based on median annualized returns from 2010-2020.

According to Preqin’s projections, it appears investors are realizing this potential. While stocks and bonds will likely remain central to portfolios, alternative assets can help to broaden investors’ horizons.

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The Recovering Financial Health of Americans

The economic recovery has not been even. We show the increase in Americans’ financial health by race, income, gender, and location.

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Financial Health

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The Recovering Financial Health of Americans

Did you spend less and save more due to the COVID-19 pandemic? If so, you’re not alone.

Overall, the percent of Americans with strong financial health increased by 2% from 2020-2021. This was largely due to the aforementioned behavioral changes, along with government interventions like stimulus payments that helped Americans pay off their debt.

However, the economic recovery has not been even for everyone. This Markets in a Minute from New York Life Investments looks at which Americans have seen the biggest increase in their financial health, broken down by race, household income, gender, and location.

What is Financial Health?

Before we dive into the results, let’s take a look at what financial health means. It is measured using eight indicators within four broad categories:

  • Spend: Spend less than income and pay bills on time
  • Save: Have sufficient liquid savings and long-term savings
  • Borrow: Have manageable debt and a prime credit score
  • Plan: Have appropriate insurance and plan ahead financially

People are considered to be financially healthy when they have strong scores across all of the above indicators.

Changes in Financial Health

In order to measure financial health, the Financial Health Network surveyed 6,403 respondents in April and May 2021. Below are the changes in financially healthy people, measured in percentage points (p.p.), from 2020-2021. Statistically significant responses, where the authors are 95% confident that the observed results are real and not an error caused by randomness, are marked with an asterisk.

GroupChange in Financially Healthy People (2020-2021)
Overall2 p.p*
Black9 p.p.*
Latinx4 p.p.*
Asian American11 p.p.*
White0 p.p.
< $30,000 Household income2 p.p.*
$30,000 - $59,999 Household income2 p.p.
$60,000 - $99,999 Household income2 p.p.
> $100,000 Household income1 p.p.
Men4 p.p.*
Women1 p.p.
Northeast2 p.p.
Midwest3 p.p.
South5 p.p.*
West-1 p.p.

With an 11 percentage point jump, Asian Americans saw the biggest increase and are now the most financially healthy of any race. The increase was due to an absence in major employment disruptions, growth in employment, and generous unemployment benefits for those who did experience disruptions.

In addition, the proportion of Black people considered financially healthy nearly doubled due to two primary factors: receipt of stimulus payments and reduced spending. This helped Black families to build up savings, pay bills on time, and improve their credit scores.

While men experienced an increase in financial health, women were disproportionately affected by employment disruptions and childcare responsibilities. For instance, women were more than twice as likely as men not to work due to childcare responsibilities in 2021. Meanwhile, men reported bigger improvements in their liquid and long-term savings than women.

People with a household income under $30,000 saw slight improvements in their financial health, primarily due to unemployment benefits and reduced spending. However, lower-income households saw a significant reduction in the “planning ahead financially” indicator, signifying this could be a temporary improvement.

A Current Snapshot

While it is primarily marginalized groups that saw the biggest improvements over the last year, large gaps in financial health remain. Here is the current percentage of people who are financially healthy for each group.

Financial Health

The starkest differences are by income level. People with a household income under $30,000 are nearly five times less likely to be financially healthy than those who have a household income over $100,000.

However, gaps occur across race, gender, and location as well:

  • The proportion of Black and Latinx people who are financially healthy is significantly lower than that of Asian Americans and White people.
  • Despite an increase in female breadwinners in recent years, women are much less likely than men to have strong financial health.
  • Of all regions, Americans living in the South are the least likely to be financially healthy.

At an aggregate level, only one-third of Americans are considered to be financially healthy.

A Continued Recovery?

While it appears that government relief efforts have helped traditionally marginalized groups, it remains unclear what will happen now that these programs are winding down. Not only that, large gaps in financial health still exist. The Financial Health Network recommends policies tailored to help close these gaps, such as universal child care and policies that reduce the disparities in educational opportunity.

Of course, government programs, macroeconomic conditions, and individual behaviors will all play a role in Americans’ financial health going forward. If you were fortunate enough to spend less during the pandemic, do you plan to continue saving more? Your actions could help you build a solid foundation to manage expenses, while also planning ahead for long-term needs.

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