This increase has been driven by the adoption of environmental, social and governance factors by investment managers when assessing their investment portfolios.
Globally, investment managers who have signed up to the UN Principles for Responsible Investment (PRI) increased by 20 per cent in the year ended March 31, 2020, from US$86.3 trillion to US$103.4 trillion of assets under management; 91 per cent of these investment managers reported incorporating these factors into their fixed income investments in 2020.
In New Zealand, the Responsible Investment Benchmark Report 2020 shows the local responsible investment market was worth $153.5b in 2019. This represents 52 per cent of the estimated $296b of total professionally managed assets in New Zealand.
The report, issued by the Responsible Investment Association Australasia (RIAA), also found impact investing has grown rapidly, from $358 million in 2018 to $4.74b in 2019. Green, Social and Sustainability (GSS) Bonds account for 88 per cent of products using this approach.
The Covid-19 pandemic has highlighted the urgency of dealing with social issues like inequality and poverty, and reminded both issuers and investors of the opportunities for social bonds.
A landmark issuance occurred in late October when the European Commission issued a 17 billion-euro social bond under its newly established 'SURE' (Support to mitigate Unemployment Risks in Emergency) Bond Programme.
The bond, which was 17 times oversubscribed, will help fund short-time work schemes; allowing businesses in economic difficulty to reduce employee hours whilst still employing them full-time.
The proceeds will also assist with health-related measures in the workplace.
The bond is part of the EU's 750 billion Euro "Next Generation EU" recovery fund launched in July, which aims to support sustainable recovery from the pandemic. There are two key focuses: keeping people in jobs and improving access to essential services such as healthcare and training.