Green

5 Drivers Behind the Sustainable Investing Shift

Published

2 years ago

December 9, 2020

Iman Ghosh

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5 Drivers Behind the Sustainable Investing Shift

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Against all odds, sustainable investing in the U.S. smashed records in 2020.

Estimated net flows reached $20.9 billion in the first six months alone—that’s nearly equal to the amount of new money invested in all of 2019.

What is driving the shift to sustainable investing? This visual dashboard from Raconteur explains five key drivers, from generational shifts to investors’ preferred strategies.

DRIVER #1:

Millennial Investors and Personal Beliefs

Interest in sustainable investing is booming across the general population. However, there’s a clear generational trend, as well.

While the portion of each group that is “very interested” in sustainable investing has shot up since 2015, this share is significantly higher for millennials.

Year	General Population	Millennials
2015	19%	28%
2017	23%	38%
2019	49%	70%

Another correlated trend emerges with this.

These days, investors are more likely to follow their conscience. Acccording to a recent report by Schroders, the majority of investors will not budge on investing against their beliefs, even if returns were theoretically higher.

	Level of Investment Knowledge
Would you invest against your personal beliefs?	Beginner	Intermediate	Expert
Yes, if returns are higher	18%	20%	29%
No, I would not invest against my beliefs.	82%	80%	71%

DRIVER #2:

Top Themes of Interest

Powered by these personal beliefs, which categories are attracting investors? It turns out many investors are very interested in including environment-related themes into their portfolios:

Plastic reduction: 46%
Climate change: 46%
Community development: 42%
Circular economy: 39%
Sustainable Development Goals: 36%
Multicultural diversity: 30%
Gender diversity: 30%
Faith-based values: 24%

However, these aren’t the only considerations. Other themes that fit into broader ESG categories such as gender diversity or faith-based values make an appearance, too.

DRIVER #3:

Which Investor Groups are Driving Interest?

Now, we turn our attention to the specific groups that are responsible for the growing momentum towards sustainable investing. This may be surprising to some, but it is institutional investors that are leading the pack by far:

Group	Share of Group
Institutional investors	85%
Institutional consultants	39%
Internal stakeholders	30%
High net worth (HNW) investors	19%
Politicians or regulators	13%
Industry trade bodies	6%

This also disproves a common myth that millennials are the only ones interested in the sector. Institutional investors equally want to see a double bottom line: an ROI on their money, while also making the world a more sustainable place.

DRIVER #4:

Sources of Information

So where are institutional investors sourcing their information around sustainable investing? Sharing their ideas in like-minded communities, such as webinars and conferences emerged as the preference for nearly two-thirds of those surveyed in this group.

But how do investors know that their investment is truly sustainable? For this, 34% of global investors feel that third-party labels from independent organizations help lend credibility, and confirm that the chosen investment in question is indeed carried out in a responsible manner.

As more and more institutional investors are digital natives, a significant share of them are also beginning to use social media to influence their decision-making process—and some even rely on it as their key source of research.

DRIVER #5:

Sustainable Investing Strategies

We’ve left the best for last—armed with this knowledge and confidence, which sustainable investing strategies are the most attractive? Here’s how organizations are approaching ESG:

Sustainability integration: 52%
Negative screening: 50%
Shareholder engagement: 31%
Impact investing: 19%
Positive screening: 12%
Thematic investing: 5%

While negative screening—avoiding investments in “sin” stocks such as tobacco or fossil fuels—is still a popular strategy, actively integrating sustainability into one’s portfolio is emerging more front and center.

The Overall Trend of Sustainable Investing

The data makes clear that institutional investors are the main driving forces behind sustainable investment for the time being. But as millennials accumulate wealth, their values may naturally lead them towards more sustainable investment.

Another important point to note is that sustainable investing has been resilient to change. In fact, despite the COVID-induced stock selloff in early 2020, ESG leaders exceeded expectations.

While these drivers evolve over time, it’s clear that sustainable investing is more than having its moment in the spotlight—it’s here to stay.

Related Topics:sustainable investing ESG investing ESG

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Environment

Visualizing the Flow of Energy-Related CO2 Emissions in the U.S.

A look at the flow of energy-related CO2 emissions from the sources that generate energy to the sectors that use it.

Published

2 days ago

March 30, 2023

Selin Oğuz

Visualizing the Flow of Energy-Related CO₂ Emissions in the U.S.

This was originally posted on the Decarbonization Channel. Subscribe to the free mailing list to be the first to see graphics related to decarbonization with a focus on the U.S. energy sector.

In 2021, U.S. carbon dioxide emissions from the generation and consumption of energy reached 4.9 billion tonnes.

To better understand how various energy sources and their end-uses contribute to carbon emissions, this graphic visualizes the flow of energy-related CO₂ emissions in the U.S. using carbon flow charts by the Lawrence Livermore National Laboratory.

What are Energy-Related CO₂ Emissions?

Energy-related CO₂ emissions refer to the release of carbon dioxide as a result of the combustion of fuels to produce energy. They arise through the direct use of fossil fuels for transport, heating, or industrial needs, as well as the use of fossil fuels for electricity generation.

To provide some context, non-energy-related CO₂ emissions are those that result from industrial chemical reactions, deforestation, and agricultural activities.

As the largest contributor to carbon emissions, however, energy-related CO₂ emissions account for approximately 85% of all emissions in the U.S. which we will now explore in more detail.

U.S. Energy-Related CO₂ Emissions in 2021

Followed by a pandemic-driven decline in 2020, energy-related carbon dioxide emissions in the U.S. increased by 325 million tonnes in 2021, marking the largest-ever annual increase.

Energy Source	CO₂ emissions in million tonnes, 2021	% of total energy-related emissions
Petroleum	2,223	45.7%
Natural Gas	1,637	33.7%
Coal	1,003	20.6%
Solar, Wind, Nuclear, Hydro, and Biomass	0	0%
Total	4,863	100%

When we follow the CO₂ emissions from the above fossil fuels to their end uses, transportation and electricity generation stand out as the biggest contributors.

In 2021, these two sectors accounted for more than 68% of all energy-related emissions in the country, roughly emitting 3.3 billion tonnes of CO₂.

End-Uses	CO₂ emissions in million tonnes, 2021	% of total energy-related emissions
Transportation	1,801	37.0%
Electricity Generation	1,537	31.6%
Industrial Uses	965	19.8%
Residential Uses	321	6.6%
Commercial Uses	239	4.9%
Total	4,863	100%

When it comes to transportation, petroleum accounted for 97% of emissions, largely due to motor gasoline and diesel consumption. On the other hand, coal and natural gas made up 99% of CO₂ emissions related to electricity generation.

Due to its high carbon intensity, coal’s contribution to power sector emissions may also be of particular interest. As the share of coal rose from 20% to 23% in the U.S. electricity mix in 2021, electricity emissions from coal also increased for the first time since 2014.

Naturally, this shift raised the overall energy-related CO₂ emissions in 2021. It also caused a 4% hike in the carbon intensity of the country’s electricity.

Lowering Emissions

To avoid the impacts of climate change, many countries and companies are working towards decarbonization across all sectors, which can largely be facilitated by reductions in energy-related carbon emissions.

Accounting for nearly 70% of all energy-related CO₂ emissions, transportation and utilities can be important pillars in these efforts.