The State of Sustainable Investing

How has the sustainable investing landscape changed over the last year?

Over the last year, we’ve experienced heightened macroeconomic uncertainty with several events impacting society and financial markets. This has included new COVID waves, inflationary pressures and supply chain issues, and the emergence of a devastating war.

Each of these circumstances has contributed to elevated volatility across asset classes. For sustainability, this pressure runs against the recent momentum we saw in the space with U.S. assets reaching over $635 billion1 at the end of 2021. Despite this near-term shift in sentiment, ESG analysis continues to play an invaluable role in our investment process. It provides an additional lens into company characteristics beyond traditional financial metrics, helping to manage uncertainty and uncover long-term investment opportunities.

How are current energy supply shortages impacting the transition to a low-carbon economy?

The energy transition remains intact, but potentially less linear in the wake of current events. In our view, navigating the path ahead starts with understanding that the economy is transitioning to carbon neutral, not carbon zero. The two are often conflated, leading to the common misconception that ESG investing requires screening out sectors of the economy—like energy for example. In reality, energy companies play an important role in both meeting current supply needs and developing new technologies for the future.

In the long run, we expect the current energy crisis to accelerate green innovation in the sector with greater emphasis on securing affordable sources of energy. We continue to develop new research insights to capture this shift and detect early signs of transition readiness. With the labor market being a critical focus in the US, one way to identify green innovation is through company hiring practices. We monitor job listings across the country in real-time and use machine learning to identify roles that require skills needed for green projects.