US outranks Europe in Schroders sustainability league table

Indonesians are more focused on sustainability than any other country, according to a major study of attitudes among people in 30 countries who invest.

Schroders Global Investor Study 2017 (GIS), which surveyed 22,100 investors around the world, found Asian countries dominated both the top and bottom of the Sustainable Investment League. India was second and China ranked in fourth.

The US (3rd) and Brazil (5th) were top among countries in the Americas, while no country from Western Europe made the top 10.

Perhaps surprisingly, given its economic and financial issues, Russia (10th) was the highest ranked European country. It was followed by Sweden (11th) and Portugal (13th) while Denmark (25th) was close to the bottom despite Scandinavia’s’ reputation for being progressive.

Attitudes in the UK (15th) and France (16th) put their investors in the middle of the league while the other large European countries were closer to the bottom: Italy (22nd) Germany (23rd).

As part of the study, investors were asked about their understanding of what it means to invest sustainably, how they behaved sustainably in their everyday lives, and how much they invested in sustainable products. Points were awarded depending on their answers and then averaged out per investor by country to give an overall score. The full GIS results can be found here.

The Sustainable Investment League 2017

Source: Schroders Global Investor Study 2017

Indonesia’s high ranking may, in part, be explained by the strong demand for Shariah-compliant funds, which follow the moral code and religious law of Islam, and may be considered to be socially-responsible investments.

But there was also a clustering at the top of the table of emerging market economies – including China, Brazil and India – where social unrest and environmental challenges are particularly acute. These difficulties may have helped sharpen attention on such issues.

Asian countries that are considered to have more developed financial markets fared badly. Hong Kong (28th), South Korea (29th) and Japan (30th) filled the bottom three places in the league table.

Definitions of sustainable investing vary but it broadly involves backing companies with the most responsible approach to environmental, social and governance issues, and pressuring those which do not.

Jessica Ground, Head of Sustainability at Schroders, said:

“Consumers’ interest in sustainability is on the rise and is especially strong in some surprising areas.

“It’s encouraging to see so much focus on sustainable investing in so many emerging economies, especially among the large populations of China, India and Brazil. This is a trend we have seen in research we’ve undertaken before. It’s also pleasing to see the US ranking so highly. We have noticed a rising and sustained interest in environmental and social issues in America, which is in contrast with the country’s withdrawal from the Paris climate agreement earlier this year.

“At the other end of the table, the low ranking of Japan is reflected in the relatively small amounts invested sustainably. In our experience, this is starting to change. A corporate governance code was introduced in 2015, setting higher standards for listed companies, which have seen a series of scandals in recent years.

“Overall, a rising interest in sustainability is to be expected. Social and environmental change is happening faster than ever. The challenges posed by climate change, inequality and demographics are sizeable. Those companies able to adapt and thrive will continue to benefit disproportionately, while others will fall further behind. Investors increasingly recognise this.”

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League table comparisons with global investment trends

The results, part of a wider Schroders Global Investor Study, echo findings from similar research in the 2016 Global Investor Study.

They also make for interesting comparison with industry data, such as the figures produced by the Global Sustainable Investment Alliance (GSIA). Its numbers show the growth of sustainable investment in certain regions and countries. While Japan was bottom of Schroders’ sustainable Investment League, sustainable investment is a fast-growing industry in the country. The GSIA’s most recent review in 2016 showed Japan’s investment in sustainable assets grew at an annual rate of 724%, albeit from a low level.

Europe remains the most invested region with more than $12 trillion invested in sustainable assets, according to the GSIA’s review. The US was second with $8.7 trillion, while Canada, Australia and New Zealand and Asia lagged behind.

Growth of sustainable assets by region 2014-2016

Source: Global Sustainable Investment Alliance. Note: Asset values are expressed in billions. Asia ex Japan 2014 assets are represented in US dollars based on the exchange rate at the year-end 2013. All other assets, as well as all 2016 assets, are converted to US dollars based on exchange rates at the year-end 2015.

Important Information: Schroders commissioned Research Plus Ltd to conduct, between 1st and 30th June 2017, an independent online study of 22,100 investors in 30 countries around the world, including Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, the Netherlands, Spain, the UK and the US. This research defines ‘investors’ as those who will be investing at least €10,000 (or the equivalent) in the next 12 months and who have made changes to their investments within the last ten years. These individuals represent the views of investors in each country included in the study.