ANZ was one of the only regions to increase the proportion of sustainable investing assets relative to total managed assets last year, new research from the Global Sustainable Investment Alliance (GSIA) has revealed.
Namely, ANZ’s proportion of sustainable investing relative to total managed assets grew from 38 per cent in 2020 to 43 per cent in 2022.
Meanwhile, all other regions except Japan – those being Europe, the US, and Canada – saw material decreases between 2020 and 2022.
Overall, GSIA’s biennial review has revealed that US$30.3 trillion ($45.6 billion) has been invested in sustainable investing assets worldwide.
Australia’s own assets under management (AUM) crossed the 1 trillion mark in 2020, reaching $1.3 trillion, or 40 per cent of total managed funds. In 2021, this surpassed $1.5 trillion, or 43 per cent of the managed fund market.
New Zealand similarly saw significant growth, with its sustainable investments covering almost half (49 per cent) of the total managed funds market, or NZ$179 billion ($165 billion), by the end of 2021.
Driving this market growth in Australasia, GSIA said, is a deep market understanding that ESG issues are impacting financial markets.
This was further shown by the significant proportion of the ANZ market that is applying ESG integration (30 per cent) as a core responsible investment approach, alongside corporate engagement and other stewardship practices (30 per cent).
Commenting on the findings, Responsible Investment Association Australasia (RIAA) chief executive officer Simon O’Connor said: “This year’s GSIR shows a clear story of a rapidly maturing industry, whereby standards have lifted across the world, to a point today where it is simply not sufficient to say you are doing responsible and sustainable investment, without being able to clearly articulate the real impact you are having.
“All in all, we welcome these developments that our organisations have been long advocating for.”
What will the next decade hold
RIAA predicts that the ANZ sustainable investing market will move into a period of significant regulatory change, encompassing disclosures frameworks, taxonomy developments, and strengthened standards to prevent greenwashing.
“Increased transparency, facilitated by standardisation of ESG disclosure, and improved ESG data capabilities are expected to improve responsible investment practices in our region over the next decade,” the association said.
While New Zealand has been an early adopter in mandating climate disclosures for corporations and financial entities, Australia is expected to jump on the bandwagon within the year.
RIAA agreed: “Climate-related financial risk disclosure is already mandated for large financial institutions in New Zealand, and Australia is expected to follow suit from mid-2024.”
The association added that the next shift to mainstreaming responsible investment will be increased capital flows towards sustainable assets and companies, aligned to Paris Agreement commitments.
However, consumers might be hoping for companies to speed things along, with RIAA’s consumer research in 2020–21 showing that the majority of Australians and New Zealanders expect their investments and pensions to be managed in a manner that is both responsible and ethical.
Namely, four out five Australians (or 83 per cent) expect their bank account and their super to be invested responsibly and ethically, and in New Zealand, 62 per cent said it is important their investment makes a positive difference in the world.