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Sustainable Investing Strategies by Popularity

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Sustainable Investing Strategies

Sustainable Investing Strategies

This infographic is available as a poster.

Sustainable Investing Strategies by Popularity

If you wanted to invest sustainably in the 1960s, your options were fairly limited. Sustainable investing strategies kicked off with socially responsible investing, where investors could exclude stocks or entire industries from their portfolio based on business activities. For example, if you didn’t agree with smoking you could exclude tobacco production companies.

Fast forward 60 years, and investors have many more approaches available to them. From exclusionary screening to ESG integration, which strategy is the most popular? This Markets in a Minute from New York Life Investments shows global assets under management for various sustainable investing strategies, to see which ones are used the most and the least globally.

The Types of Sustainable Investing Strategies

Before we dive into the numbers, it’s helpful to know the definitions of the various sustainable investing strategies. The Global Sustainable Investment Alliance, who put together this data, has classified sustainable investing into the seven core strategies below.

  • ESG integration: The explicit inclusion of environmental, social, and governance (ESG) factors into financial analysis
  • Negative/exclusionary screening: The exclusion of certain sectors, companies, or countries based on activities considered not investable
  • Corporate engagement & shareholder action: Influencing corporate behavior through actions such as shareholder proposals
  • Norms-based screening: Screening investments based on international norms, such as those issued by the UN
  • Sustainability-themed/thematic investing: Investing in themes specifically contributing to sustainable solutions, such as diversity
  • Positive screening/best-in-class: Investment in sectors, companies, or projects with positive ESG performance relative to industry peers
  • Impact/community investing: Investing to achieve positive ESG impacts, and/or investing in traditionally underserved communities

While these sustainable investing strategies differ in their approaches, they all require investors to consider ESG factors as they build and manage portfolios.

Sustainable Investing Strategies by Global AUM

Below, we show the global assets under management (AUM) of the sustainable investing strategies in 2020. It should be noted that these numbers include some double counting, as asset managers may apply more than one strategy to a given pool of assets.

StrategyGlobal Assets Under Management (2020)
ESG integration$25.2T
Negative/exclusionary screening$15.0T
Corporate engagement and shareholder action$10.5T
Norms-based screening$4.1T
Sustainability-themed investing$1.9T
Positive/best-in-class screening$1.4T
Impact/community investing$352B

In 2020, ESG integration overtook negative/exclusionary screening to become the most popular of all sustainable investing strategies. Its rise can likely be attributed to having access to more specific data, such as ESG ratings, that make an inclusive approach easier to implement. In addition, many investors are beginning to understand that considering ESG factors alongside financial analysis may help manage investment risks and increase return potential.

Coming in at third place, corporate engagement and shareholder action has over $10 trillion in assets worldwide. A separate report found that the number of ESG-related campaigns went up in 2021, and the success of investor activist campaigns increased slightly year over year. In fact, 25% of surveyed U.S. boards say they have already tied executive compensation to ESG metrics or are planning to do so.

Impact/community investing has the least AUM globally. It is most popular in the U.S., where 60% of the strategy’s total assets are held.

Growth Rate by Strategy

Of course, the above data reflects that some strategies–like exclusionary screening–have been around for longer periods of time. In contrast, the idea of impact investing was spurred in 2009 after the Global Impact Investing Network was launched.

Another way of gauging each strategy’s popularity would be to look at its recent growth. Here’s the compound annual growth rate of the sustainable investing strategies from 2016-2020.

Sustainable Investing Strategies

Sustainability-themed investing saw the highest growth. In 2020, it overtook positive/best-in-class screening to become the fifth most popular strategy. This growth mirrors the rise of thematic investing more broadly, as investors aim to capitalize on long-term structural shifts.

Norms-based screening was the only strategy to see negative growth, likely due to the way it is defined. Some standards falling under this strategy are now minimum and mandatory requirements by various national governments, especially in Europe where regulations have tightened. Because it is expected that these regulations are being followed, investors are least likely to say that norms-based screening is the strategy they use when they classify their sustainable investments.

Spoilt for Choice

Compared to the 1960s, today’s investors have many more sustainable investing strategies at their fingertips. However, with more options comes a new challenge: which strategies should investors consider?

The answer will depend on an investor’s objectives, but this data can give some insight on how other investors are approaching sustainable investing.

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Markets in a Minute

Mapped: GDP Growth Forecasts by Country, in 2023

The global economy faces an uncertain future in 2023. This year, GDP growth is projected to be 2.9%—down from 3.2% in 2022.

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GDP Growth

Mapped: GDP Growth Forecasts by Country, in 2023

Since Russia’s invasion of Ukraine early last year, talk of global recession has dominated the outlook for 2023.

High inflation, spurred by rising energy costs, has tested GDP growth. Tightening monetary policy in the U.S., with interest rates jumping from roughly 0% to over 4% in 2022, has historically preceded a downturn about one to two years later.

For European economies, energy prices are critical. The good news is that prices have fallen recently since March highs, but the continent remains on shaky ground.

The map shows GDP growth forecasts by country for the year ahead, based on projections from the International Monetary Fund (IMF) October 2022 Outlook and January 2023 update.

2023 GDP Growth Outlook

The world economy is projected to see just 2.9% GDP growth in 2023, down from 3.2% projected for 2022.

This is a 0.2% increase since the October 2022 Outlook thanks in part to China’s reopening, higher global demand, and slowing inflation projected across certain countries in the year ahead.

With this in mind, we show GDP growth forecasts for 191 jurisdictions given multiple economic headwinds—and a few emerging bright spots in 2023.

Country / Region2023 Real GDP % Change (Projected)2022 Real GDP % Change (Projected)
🇦🇱 Albania2.5%4.0%
🇩🇿 Algeria2.6%4.7%
🇦🇴 Angola3.4%2.9%
🇦🇬 Antigua and Barbuda5.6%6.0%
🇦🇷 Argentina*2.0%4.0%
🇦🇲 Armenia3.5%7.0%
🇦🇼 Aruba2.0%4.0%
🇦🇺 Australia*1.6%3.8%
🇦🇹 Austria1.0%4.7%
🇦🇿 Azerbaijan2.5%3.7%
🇧🇭 Bahrain3.0%3.4%
🇧🇩 Bangladesh6.0%7.2%
🇧🇧 Barbados5.0%10.5%
🇧🇾 Belarus0.2%-7.0%
🇧🇪 Belgium0.4%2.4%
🇧🇿 Belize2.0%3.5%
🇧🇯 Benin6.2%5.7%
🇧🇹 Bhutan4.3%4.0%
🇧🇴 Bolivia3.2%3.8%
🇧🇦 Bosnia and Herzegovina2.0%2.4%
🇧🇼 Botswana4.0%4.1%
🇧🇷 Brazil*1.2%2.8%
🇧🇳 Brunei Darussalam3.3%1.2%
🇧🇬 Bulgaria3.0%2.9%
🇧🇫 Burkina Faso4.8%3.6%
🇧🇮 Burundi4.1%3.3%
🇨🇻 Cabo Verde4.8%4.0%
🇨🇲 Cameroon4.6%3.8%
🇰🇭 Cambodia6.2%5.1%
🇨🇦 Canada*1.5%3.3%
🇨🇫 Central African Republic3.0%1.5%
🇹🇩 Chad3.4%3.3%
🇨🇱 Chile-1.0%2.0%
🇨🇳 China*5.3%3.2%
🇨🇴 Colombia2.2%7.6%
🇰🇲 Comoros3.4%3.0%
🇨🇷 Costa Rica2.9%3.8%
🇨🇮 Côte d'Ivoire6.5%5.5%
🇭🇷 Croatia3.5%5.9%
🇨🇾 Cyprus2.5%3.5%
🇨🇿 Czech Republic1.5%1.9%
🇨🇩 Democratic Republic of the Congo6.7%6.1%
🇩🇰 Denmark0.6%2.6%
🇩🇯 Djibouti5.0%3.6%
🇩🇲 Dominica4.9%6.0%
🇩🇴 Dominican Republic4.5%5.3%
🇪🇨 Ecuador2.7%2.9%
🇪🇬 Egypt*4.0%6.6%
🇸🇻 El Salvador1.7%2.6%
🇬🇶 Equatorial Guinea-3.1%5.8%
🇪🇷 Eritrea2.9%2.6%
🇪🇪 Estonia1.8%1.0%
🇸🇿 Eswatini1.8%2.4%
🇪🇹 Ethiopia5.3%3.8%
🇫🇯 Fiji6.9%12.5%
🇫🇮 Finland0.5%2.1%
🇫🇷 France*0.7%2.5%
🇲🇰 North Macedonia3.0%
🇬🇦 Gabon3.7%2.7%
🇬🇪 Georgia4.0%9.0%
🇩🇪 Germany*0.1%1.5%
🇬🇭 Ghana2.8%3.6%
🇬🇷 Greece1.8%5.2%
🇬🇩 Grenada3.6%3.6%
🇬🇹 Guatemala3.2%3.4%
🇬🇳 Guinea5.1%4.6%
🇬🇼 Guinea-Bissau4.5%3.8%
🇬🇾 Guyana25.2%57.8%
🇭🇹 Haiti0.5%-1.2%
🇭🇳 Honduras3.5%3.4%
🇭🇰 Hong Kong SAR3.9%-0.8%
🇭🇺 Hungary1.8%5.7%
🇮🇸 Iceland2.9%5.1%
🇮🇳 India*6.1%6.8%
🇮🇩 Indonesia*4.8%5.3%
🇮🇶 Iraq4.0%9.3%
🇮🇪 Ireland4.0%9.0%
🇮🇷 Iran*2.0%3.0%
🇮🇱 Israel3.0%6.1%
🇮🇹 Italy*0.6%3.2%
🇯🇲 Jamaica3.0%2.8%
🇯🇵 Japan*1.8%1.7%
🇯🇴 Jordan2.7%2.4%
🇰🇿 Kazakhstan*4.3%2.5%
🇰🇪 Kenya5.1%5.3%
🇰🇮 Kiribati2.4%1.0%
🇰🇷 South Korea*1.7%2.6%
🇽🇰 Kosovo3.5%2.7%
🇰🇼 Kuwait2.6%8.7%
🇰🇬 Kyrgyz Republic3.2%3.8%
🇱🇦 Lao P.D.R.3.1%2.2%
🇱🇻 Latvia1.6%2.5%
🇱🇸 Lesotho1.6%2.1%
🇱🇷 Liberia4.2%3.7%
🇱🇾 Libya17.9%-18.4%
🇱🇹 Lithuania1.1%1.8%
🇱🇺 Luxembourg1.1%1.6%
🇲🇴 Macao SAR56.7%-22.4%
🇲🇬 Madagascar5.2%4.2%
🇲🇼 Malawi2.5%0.9%
🇲🇾 Malaysia*4.4%5.4%
🇲🇻 Maldives6.1%8.7%
🇲🇱 Mali5.3%2.5%
🇲🇹 Malta3.3%6.2%
🇲🇭 Marshall Islands3.2%1.5%
🇲🇷 Mauritania4.8%4.0%
🇲🇺 Mauritius5.4%6.1%
🇲🇽 Mexico*1.7%2.1%
🇫🇲 Micronesia2.9%-0.6%
🇲🇩 Moldova2.3%0.0%
🇲🇳 Mongolia5.0%2.5%
🇲🇪 Montenegro2.5%7.2%
🇲🇦 Morocco3.1%08%
🇲🇿 Mozambique4.9%3.7%
🇲🇲 Myanmar3.3%2.0%
🇳🇦 Namibia3.2%3.0%
🇳🇷 Nauru2.0%0.9%
🇳🇵 Nepal5.0%4.2%
🇳🇱 Netherlands*0.6%4.5%
🇳🇿 New Zealand1.9%2.3%
🇳🇮 Nicaragua3.0%4.0%
🇳🇪 Niger7.3%6.7%
🇳🇬 Nigeria*3.2%3.2%
🇳🇴 Norway2.6%3.6%
🇴🇲 Oman4.1%4.4%
🇵🇰 Pakistan*2.0%6.0%
🇵🇼 Palau12.3%-2.8%
🇵🇦 Panama4.0%7.5%
🇵🇬 Papua New Guinea5.1%3.8%
🇵🇾 Paraguay4.3%0.2%
🇵🇪 Peru2.6%2.7%
🇵🇭 Philippines*5.0%6.5%
🇵🇱 Poland*0.3%3.8%
🇵🇹 Portugal0.7%6.2%
🇵🇷 Puerto Rico0.4%4.8%
🇶🇦 Qatar2.4%3.4%
🇨🇬 Republic of Congo4.6%4.3%
🇷🇴 Romania3.1%4.8%
🇷🇺 Russia*0.3%-3.4%
🇷🇼 Rwanda6.7%6.0%
🇼🇸 Samoa4.0%-5.0%
🇸🇲 San Marino0.8%3.1%
🇸🇹 São Tomé and Príncipe2.6%1.4%
🇸🇦 Saudi Arabia*2.6%7.6%
🇸🇳 Senegal8.1%4.7%
🇷🇸 Serbia2.7%3.5%
🇸🇨 Seychelles5.2%10.9%
🇸🇱 Sierra Leone3.3%2.4%
🇸🇬 Singapore2.3%3.0%
🇸🇰 Slovak Republic1.5%1.8%
🇸🇮 Slovenia1.7%5.7%
🇸🇧 Solomon Islands2.6%-4.5%
🇸🇴 Somalia3.1%1.9%
🇿🇦 South Africa*1.2%2.1%
🇸🇸 South Sudan5.6%6.5%
🇪🇸 Spain*1.1%4.3%
🇱🇰 Sri Lanka-3.0%-8.7%
🇰🇳 St. Kitts and Nevis4.8%9.8%
🇱🇨 St. Lucia5.8%9.1%
🇻🇨 St. Vincent and the Grenadines6.0%5.0%
🇸🇩 Sudan2.6%-0.3%
🇸🇷 Suriname2.3%1.3%
🇸🇪 Sweden-0.1%2.6%
🇨🇭 Switzerland0.8%2.2%
🇹🇼 Taiwan2.8%3.3%
🇹🇯 Tajikistan4.0%5.5%
🇹🇿 Tanzania5.2%4.5%
🇹🇭 Thailand*3.7%2.8%
🇧🇸 The Bahamas4.1%8.0%
🇬🇲 The Gambia6.0%5.0%
🇹🇱 Timor-Leste4.2%3.3%
🇹🇬 Togo6.2%5.4%
🇹🇴 Tonga2.9%-2.0%
🇹🇹 Trinidad and Tobago3.5%4.0%
🇹🇳 Tunisia1.6%2.2%
🇹🇷 Turkey*3.0%5.0%
🇹🇲 Turkmenistan2.3%1.2%
🇹🇻 Tuvalu3.5%3.0%
🇺🇬 Uganda5.9%4.4%
🇺🇦 UkraineN/A-35.0%
🇦🇪 United Arab Emirates4.2%5.1%
🇬🇧 United Kingdom*-0.6%3.6%
🇺🇲 U.S.*1.4%1.6%
🇺🇾 Uruguay3.6%5.3%
🇺🇿 Uzbekistan4.7%5.2%
🇻🇺 Vanuatu3.1%1.7%
🇻🇪 Venezuela6.5%6.0%
🇻🇳 Vietnam6.2%7.0%
West Bank and Gaza3.5%4.0%
🇾🇪 Yemen3.3%2.0%
🇿🇲 Zambia4.0%2.9%
🇿🇼 Zimbabwe2.8%3.0%

*Reflect updated figures from the January 2023 IMF Update.

The U.S. is forecast to see 1.4% GDP growth in 2023, up from 1.0% seen in the last October projection.

Still, signs of economic weakness can be seen in the growing wave of tech layoffs, foreshadowed as a white-collar or ‘Patagonia-vest’ recession. Last year, 88,000 tech jobs were cut and this trend has continued into 2023. Major financial firms have also followed suit. Still, unemployment remains fairly steadfast, at 3.5% as of December 2022. Going forward, concerns remain around inflation and the path of interest rate hikes, though both show signs of slowing.

Across Europe, the average projected GDP growth rate is 0.7% for 2023, a sharp decline from the 2.1% forecast for last year.

Both Germany and Italy are forecast to see slight growth, at 0.1% and 0.6%, respectively. Growth forecasts were revised upwards since the IMF’s October release. However, an ongoing energy crisis exposes the manufacturing sector to vulnerabilities, with potential spillover effects to consumers and businesses, and overall Euro Area growth.

China remains an open question. In 2023, growth is predicted to rise 5.2%, higher than many large economies. While its real estate sector has shown signs of weakness, the recent opening on January 8th, following 1,016 days of zero-Covid policy, could boost demand and economic activity.

A Long Way to Go

The IMF has stated that 2023 will feel like a recession for much of the global economy. But whether it is headed for a recovery or a sharper decline remains unknown.

Today, two factors propping up the global economy are lower-than-expected energy prices and resilient private sector balance sheets. European natural gas prices have sunk to levels seen before the war in Ukraine. During the height of energy shocks, firms showed a notable ability to withstand astronomical energy prices squeezing their finances. They are also sitting on significant cash reserves.

On the other hand, inflation is far from over. To counter this effect, many central banks will have to use measures to rein in prices. This may in turn have a dampening effect on economic growth and financial markets, with unknown consequences.

As economic data continues to be released over the year, there may be a divergence between consumer sentiment and whether things are actually changing in the economy. Where the economy is heading in 2023 will be anyone’s guess.

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Chart: The State of U.S. Retirement Assets in 2022

U.S. retirement assets have faced challenging conditions amid market headwinds—but over the last decade these assets have nearly doubled.

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U.S. Retirement Assets in 2022

This infographic is available as a poster.

Chart: The State of U.S. Retirement Assets in 2022

Today, many people are questioning the effects of high inflation on their retirement assets.

This Markets in a Minute from New York Life Investments charts the state of U.S. retirement assets to show how Americans are building their retirement savings, and where these assets are being drawn from.

U.S. Retirement Assets: Where it Stands Today

As of 2022, there was over $33 trillion being held in U.S. retirement assets.

For perspective, that’s about 31% of all household financial assets in America and nearly double the amount seen a decade ago. In the table below, we show how this breaks down by retirement asset type, using data from the Investment Company Institute:

Type of Retirement Asset2022*2012200219921982
IRAs$11.7T$5.8T$2.5T$872B$67B
DC Plans$9.3T$5.2T$2.6T$1.1T$264B
State and Local Government DB Plans$5.1T$3.2T$2.1T$958B$260B
Private-Sector DB Plans$3.2T$2.7T$1.7T$1.1T$479B
Federal DB Plans$2.2T$1.3T$800B$411B$99B
Annuities$2.2T$1.7T$899B$473B$180B
Total $33.7T$19.9T$10.5T$5.0T$1.3T

*As of Q2 2022.

As seen above, individual retirement accounts (IRAs) hold the most retirement assets, at 34% of the total. Since 2012, they have doubled, jumping from $5.8 trillion to $11.7 trillion in 2022.

Today, about 37% of Americans hold an IRA.

With $9.3 trillion in assets, defined contribution (DC) plans are the second-greatest source of savings. These type of plans have the employee make contributions that are automatically deducted from their paycheck. Here, employers have the option to make contributions. Like IRAs, they have grown considerably in the last 10 years.

Defined benefit (DB) plans, meanwhile, have declined in usage, especially in the private sector. In 1982, private-sector DB plans made up almost 40% of U.S. retirement assets. In 2022, they accounted for under 10% of these assets.

Overall, retirement assets have declined in 2022 due to weak market performance—after a record year in 2021 driven by higher contributions, a strong market, and other factors.

U.S. Financial Security in 2022

With these factors at play, how are Americans feeling about their financial security, and how is this impacting their retirement outlook?

In one Ipsos survey, just 56% of Americans surveyed said they felt good about their overall level of financial security.

When it comes to their long-term outlook, chief among concerns is inflation. Over half surveyed said that it will likely have a big impact on their ability to save for retirement and meet other long-term financial goals. Rising interest rates and medical costs are other areas of concern, with about one-third saying they will have a large impact on achieving these outcomes.

Meanwhile, 59% of Americans said they feel confident they have enough savings to enjoy a comfortable retirement. Of these, Baby Boomers feel most confident at 70%, while Gen Z (48%) feels least confident.

The good news is that inflation looks to have hit its peak in the summer of 2022. Still, reaching a 2-3% target may take a longer period of time. With this in mind, looking to investment strategies that include floating-rate bonds and real estate, infrastructure, and value equities may help insulate retirement assets from market fluctations and inflation.

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