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.

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.

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:

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.

Mapped: Which Countries Have the Worst Air Pollution?

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In many parts of the world, blue skies are a rarity. Instead, accumulated levels of air pollution from industrial processes and motor vehicle traffic cloak cities in smog year-round.

But to what extent does air pollution impact the human population around the world?

To answer this question, data scientist Matt Dzugan has created a cartogram that shades each country based on levels of fine particulate matter (PM2.5) air pollution experienced by the population living there.

Carto-What?

First off, let’s talk about the visualization style itself.

Not your everyday map, this unconventional cartogram resizes the borders of countries based on their total populations. In this style, a single square represents 500,000 people. According to Matt Dzugan, the cartogram view is meant to provide a bird’s eye perspective of the impact of air pollution and fine particulate matter (PM2.5) on human lives.

A clear correlation emerges: some of the most inhabited places in the world also experience the most pollution. Highly populated China and India show up the most prominently, while other countries like Australia and Canada seem to disappear off the map entirely.

To put this into perspective, 800 dark brown squares on this cartogram (a PM2.5 concentration of 50 μg/m³) represent 400 million people in India that are exposed to polluted air at levels five times past thresholds set by the World Health Organization.

Top 20 Countries with Cleanest Air

So how do countries on each end of the PM2.5 spectrum shake out? Pulling supplemental data from the WHO, here’s how the top 20 countries with the cleanest air rank.

New Zealand tops the above list. And as you can see, air quality tends to be highest in advanced coastal economies with low population densities—and being an island or bordering less habitable Arctic tundra also helps as well.

That said, there are temporary bouts when air quality can dip in even the best of countries. For example, recent wildfires on the West Coast of the United States and Australia resulted in reddish-orange skies and hazardous levels of air quality for weeks at a time.

The 20 Countries with the Most Air Pollution

On the other hand, it may be surprising that Nepal lands all the way at the bottom of the air quality list. Why is this landlocked country—home to less than 30 million—suffering from hazardous air pollution reaching 100μg/m³?

In short, the emissions from fossil-fuel driven traffic and manufacturing operations are trapped within the Kathmandu valley, which causes air quality issues for people living in the region.

The regions with lower air quality tend to be more landlocked with developing economies, such as some countries in central Africa and Asia, as well as in the Middle East.

Finally, while China is lower on this overall list, it’s worth noting that it is one of the most prominent on the cartogram due to its sheer population size.