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Visualizing U.S. Stock Ownership Over Time (1965-2019)

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Stock Ownership in the U.S.

Stock Ownership

This infographic is available as a poster.

U.S. Stock Ownership Over Time (1965-2019)

The U.S. stock market is the largest in the world, with total U.S. stock ownership amounting to almost $40 trillion in 2019. But who owns all these equities?

In this Markets in a Minute from New York Life Investments, we show the percentage of U.S. stock owned by various groups, and how the proportions have changed over time.

The Groups Who Own U.S. Stock

Based on calculations from the Tax Policy Center, here is the breakdown of U.S. stock ownership as of the year 2019.

CategoryShare of U.S. StockValue
Foreigners40%$16.0T
Retirement accounts30%$12.0T
Taxable accounts24%$9.5T
Non-profits5%$2.0T
Government1%$368B

Foreigners own the most U.S. stock. Their portion of ownership has grown rapidly, climbing from about 5% in 1965 to 40% in 2019. Foreign ownership exists in two forms: portfolio holdings and foreign direct investment. The former includes holdings with less than 10% of voting stock, while the latter refers to voting stock of 10% or more.

Why has foreign ownership increased so substantially? According to the Tax Policy Center, the growth appears unrelated to U.S. corporate tax rates. Instead, the increase is likely a result of globalization, as U.S. holdings of foreign stock climbed at a similar rate over the same timeframe.

Outside of foreigners, the largest domestic ownership groups are retirement accounts and taxable accounts. Stock ownership within taxable accounts has decreased by 56 percentage points since 1965. On the flip side, U.S. households have increased stock ownership within tax-advantaged retirement accounts, which now amounts to 30% of all U.S. stock holdings.

Retirement Accounts: A Closer Look

The proportion of U.S. stock held in defined benefit plans has decreased substantially since 1965.

U.S. Stock Ownership in Retirement Accounts

Note: life insurance separate accounts are reserves that fund annuities or life insurance policies.

This drop is partly due to the general decline in private employers offering defined benefit plans. Since these pension plans guarantee employees a set amount in retirement, they present a large long-term funding burden.

At the same time, there has been a corresponding increase in U.S. stock ownership within defined contribution plans and individual retirement accounts (IRAs). This reflects the fact that many investors are facing more responsibility, as they must take charge of their portfolios in order to build a sufficient nest egg for retirement.

The Future of U.S. Stock Ownership

Compared to 50 years ago, the composition of U.S. stock ownership today looks very different.

Foreign ownership has increased as globalization took hold, though it’s hard to say if this rise will continue. Since 2017, foreign direct investment in the U.S. has decreased. Not only that, China surpassed the U.S. as the top destination for foreign direct investment in 2020.

In addition, the shift to particular tax-advantaged retirement accounts has been a relatively recent one. For instance, IRAs didn’t exist before 1978, and defined contribution plans started becoming popular in 1980. As circumstances continue to evolve, how will U.S. stock ownership change over the next 50 years?

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Markets in a Minute

Four Types of ESG Strategies for Investors

Amid a global wave of green investment, this graphic breaks down four types of environmental, social, and governance (ESG) strategies.

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ESG Strategies

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Four Types of ESG Strategies for Investors

In recent years, sustainable investment strategies have shown a number of benefits for investors, from resilience in market downturns to share outperformance in the long-term.

Meanwhile, investor interest has skyrocketed—with environmental, social, and governance (ESG) indexes advancing 40% between 2019 and 2020 alone. Given the increased demand for green investments, investors have an ever-expanding list of options to choose from. But what ESG approach is the right fit for you?

To answer this question, this Markets in a Minute chart from New York Life Investments looks at the primary strategies used in ESG investing to help investors choose the approach that works best for their portfolio.

What Kind of Investor are You?

Broadly speaking, there are four main approaches to ESG investing: ESG integration, exclusionary investing, inclusionary investing, and impact investing.

1. ESG Integration

“I want to integrate ESG factors and traditional factors to assess the risk/reward profile of my investment.”

For example, using an ESG integration approach, a company’s water usage and toxic emissions would be assessed against financial factors to analyze any future risks or investment opportunities.

2. Exclusionary Investing

“I want to screen out controversial companies or sectors that do not meet my sustainability criteria.”

Using an exclusionary investing approach, an investor may screen out companies whose revenues are from tobacco, gambling, or fossil fuels.

Related ESG Terms:

  • Negative Screening
  • Negative Selection
  • Socially Responsible Investing (SRI)

3. Inclusionary Investing

“I want to seek out companies that are ranked highly in their sector based on sustainability criteria.”

With an inclusionary approach, a fund may include the leading companies in a sector, relative to their peers, such as the top performing tech companies in ESG.

Related ESG Terms:

  • Positive Screening
  • Positive Selection
  • Best-In-Class
  • Positive Tilt
  • Thematic Investing

4. Impact Investing

“I want to invest in companies that attempt to deliver a measurable social and/or environmental impact alongside financial returns.”

Lastly, impact investing approaches may focus specifically on renewable energy companies that have the intent to make a positive environmental impact.

Related ESG Terms:

  • Goal-Based Investing
  • Thematic Investing

ESG Investing Strategies, By Market

How does interest in ESG strategies vary according to geographical region? Overall, interest has increased across all regions globally (where data was available).

Interest in ESG By Market*20182020
India98%100%
Mainland China95%98%
UAE90%94%
MexicoN/A92%
France79%91%
Brazil82%90%
JapanN/A88%
Hong Kong, SAR China71%86%
South AfricaN/A83%
Germany64%81%
Singapore77%78%
United Kingdom51%77%
Canada49%68%
Australia49%65%
U.S.49%57%

*With interest in these strategies and already employing them
Source: CFA Institute (Dec, 2020)

At the top was India, where 100% of respondents expressed interest or were already using ESG strategies—up from 96% in 2018.

In fact, India developed National Voluntary Guidelines on Social, Environmental, and Economic Responsibilities of Business as far back as 2011. This was designed as a guideline for responsible business conduct, which later aligned to the UN Sustainable Development Goals in 2016.

Following closely behind were investors in China (98%) and UAE (94%).

By contrast, 57% of investors in the U.S. employed ESG strategies—the lowest among geographic regions. Despite this, in the last two years, this figure jumped 8%, and it may rise higher yet given U.S. president Joe Biden’s new climate priorities. Electric grid and clean energy, decarbonization, and electric vehicle incentives all fall under a massive $2 trillion infrastructure plan, which will likely have a significant impact on the dialogue surrounding ESG.

Going Green

As the global drive for ESG investment continues to rise, investors can harness a greater understanding of different ESG strategies to meet their personal objectives—whether it is risk/reward analysis, seeking out ESG top performers, or a measurable environmental impact.

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ESG Investing: The Top 5 Drivers, According to Investors

ESG investing, which considers environmental, social, and governance factors has never been more popular. What are the key drivers behind its rise?

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ESG Investing

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ESG Investing: The Top Five Drivers

Today, environmental, social and governance (ESG) investing has never been more popular, surpassing record levels seen in 2020, according to Google Trends.

By 2025, ESG investing is projected to reach $53 trillion in assets globally—roughly equal to a third of all investment assets under management. It raises an important question: why are people choosing to use an ESG strategy?

To answer this question, the above Markets in a Minute chart from New York Life Investments looks at the top drivers behind ESG investing, based on a survey of 2,800 Chartered Financial Analyst (CFA) investment professionals.

What is ESG Investing?

ESG investing refers to assets that are selected according to their environmental, social, and governance factors.

These include everything from carbon intensity and gender representation, to executive pay. Often, these variables are analyzed through sources such as sustainability reports or government data, among others.

Broadly speaking, ESG investing strategies can fall into four main categories:

  • Values & Screening: Determines sectors, companies, and activities that are included or excluded from investment such as fossil fuels. This can also be based on investors’ values.
  • Integration: Identifies the risks and opportunities of ESG factors on companies. Typically more complex than screening approaches.
  • Thematic: Focuses on structural themes in ESG such as women’s leadership or smart cities.
  • Impact: Specific goals are designed to be met, such as companies that are working towards the UN Sustainable Development Goals.

Given its rapid rise, here are the most influential reasons why investors—retail and institutional alike—are paying attention to this trend.

The Top 5 Drivers of ESG Investing

Simply put, risk management and client demand were the most prominent factors behind ESG investing in 2020.

Driver of ESG Investing20172020
To help manage investment risks65%64%
Clients/investors demand it45%59%
It's our fiduciary duty36%43%
My firm derives reputational benefits32%41%
To improve financial returnsN/A*35%

Based on a March 2020 survey of 2,800 CFA institute members who were asked: ‘Why do you or your organization take ESG issues into consideration in your investment analysis/decision? (Select all that apply)
*No data available in 2017

Fiduciary duty ranked third highest, impacting the decisions of 43% of investment professionals.

Here, fiduciary duty is when an investment professional acts in the best interest of a client. From Brazil to the U.S., over 500 socially responsible regulations have been enforced globally, including corporate disclosures and pension fund regulations.

Additionally, improving financial returns was a primary reason for 35% of the respondents. In 2020, for example, 22 out of 23 ESG index funds outperformed their comparable non-ESG index.

ESG Investing: Age is Just a Number

Who is investing in ESG?

Across age groups, people were motivated by higher risk-adjusted returns and values to varying degrees. For instance, 42% of investors between 25-34 expected higher risk-adjusted returns from ESG compared to 16% of investors aged 55-64.

At the same time, 47% of investors across all age groups wanted to invest in ESG to express their personal values or focus on companies that were making a positive contribution to society and the climate.

Reason for Investing in ESG25-3435-4445-5455-6465+
To realize higher risk-adjusted returns42%39%18%16%14%
To express personal values or invest in companies with a positive societal/environmental impact44%41%54%50%50%
Both14%19%28%34%35%

Source: CFA (Apr, 2020)

Meanwhile, roughly a quarter of investors said that both higher risk-adjusted returns and sustainable impact underscore their interest in ESG.

Reason for Investing in ESGOverall
To realize higher risk-adjusted returns29%
To express personal values or invest in companies with a positive societal/environmental impact47%
Both24%

Source: CFA (Apr, 2020)

In 2020, 10% of retail investors invested in ESG. By comparison, interest in ESG is much higher. Almost 70% of individual investors expressed interest in these strategies.

Investment in ESGRetail InvestorsInstitutional Investors
Currently invest in ESG10%19%
Show interest in ESG69%76%

Source: CFA (Apr, 2020)

Perhaps one of the most interesting takeaways from this study, however, is the wide gap between interest and investment in ESG. One factor behind this gap could be due to the fact that just 41% of advisors have spoken to clients about ESG investing, research shows.

However, underlying perspectives on performance, demand, and personal preferences show that ESG may further cement its way into not only the investment dialogue, but investors’ portfolios.

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