By Jennifer Wolfe, Director of ABS and Investor Policy of SFA
“It is imperative for the structured finance industry to embrace ESG-focused investing so that our market continues to be attractive and compelling within the fixed income universe, especially as more and more investors and stakeholders look at opportunities though an ESG lens.”
– Nancy Mueller Handal, CFA
Head of Private Fixed Income and Alternatives
MetLife Investment Management
ESG investing is here – what does it mean for our market?
Impact investing. Clean energy. Social good. Sustainable finance. Green bonds. Corporate governance.
What does it all add up to?
E, S and G – or Environmental, Social and Governance-focused investing.
It has become clear over the past decade that ESG will play an increasing role in investment considerations and strategic planning for money managers and individual investors alike.
How big is the ESG market?
In the United States, ESG investing is driven by asset managers, who now consider ESG criteria across $11.6 trillion in assets, up 44% from $8.1 trillion in 2016. Green bonds are also increasingly popular as companies develop initiatives to combat climate change, with $120 billion of issuance in the first half of 2019, up from $85 billion in the second half of 2018. In the exchange-traded fund (ETF) market, ESG funds have more than doubled in 2019 to $16 billion, but that only represents a small fraction of the overall $4 trillion ETF industry.
Notably, the European appetite is even greater, as the market for ESG-focused funds has grown faster and currently totals $124 billion.
What is SFA doing?
Responding to rising interest and expertise from SFA members, we have launched an ESG Task Force to engage across our membership and seek to implement ESG factors to structured finance.
To launch this initiative, we are hosting an inaugural ESG Investing Symposium in New York. This roundtable discussion will address what ESG means for structured finance and how participants can apply ESG frameworks and principles to our market. Advancing the integration of ESG factors into business practices and reporting will require industry-wide collaboration across market participants.
Symposium participants will tackle these topics, and more, over the course of the day:
- What we can and should apply from ESG frameworks in other sectors;
- Current ESG investing approaches and rating agency approaches;
- ESG-focused funds and ESG-friendly investment vehicles;
- What ESG investing means for structured finance;
- Data reporting and standardization.
The discussions during the symposium will serve as the basis for determining the direction and goals for SFA’s ESG investing initiative as we develop workstreams around applying ESG approaches to structured finance.
Attend SFA’s ESG Symposium
We invite you to attend our first ESG event in New York City on December 5th to be part of the conversation. Learn how other market participants view ESG and share your own views to shape how the industry moves forward in applying ESG frameworks to our market. SFA is excited to launch this effort and urges participation from all market perspectives as we seek to determine a path forward for the industry.
We look forward to seeing you there! Register here.