Sustainable investing in the U.S. grew into a $6.5 trillion market, accounting for 12% of assets under professional management in the country, the US SIF Foundation said in its annual sustainable investing trends report, out this week.

Nearly three-quarters of the 250 asset managers and institutional asset owners surveyed by US SIF said the expect the sustainable investment market to grow over the next one to two years. But only 39% of respondents expect their own organizations to increase sustainable investing, indicating that this growth is anticipated to come from broader participation in the market, the report found.

Much of the growth is expected to be led by investments that address climate change and the clean energy transition, which the report identified as the No. 1 priority of sustainable investors.

“Investor interest in capturing the opportunity of the climate transition remains a huge opportunity for the industry,” said Maria Lettini, CEO of US SIF, in a press release announcing the report’s findings.

“Broader global market trends such as regulatory obligations, evolving client preferences, the transfer of inter-generational wealth and the growing frequency and severity of financially material physical and transition risks associated with climate change are certainly contributing to investors’ interest,” she said.

Among the other highlights from the report:

• The integration of sustainability or ESG characteristics (81%) and the use of negative or exclusionary screening (75%) remain the most frequently reported sustainable investing strategies. Over 65% of respondents use three or more strategies across their investments.
• Partial or full fossil-fuel exclusions is now the most frequently reported negative screen (68%), surpassing tobacco exclusions (66%).
• Direct impact investing and community investing continues to be a bright spot with growing enthusiasm across multiple types of investors.
• Survey results indicate that there is a strong core group of investors who undertake multiple shareholder engagement activities.

“This 2024 edition of the US Sustainable Investing Trends Report highlights the recognition that stewardship plays an intrinsic role in driving value creation opportunities,” said Dan Hanson, managing director, head of sustainable equity group at Neuberger Berman. “Many asset owners and asset managers continue to view shareholder engagement as a crucial investment imperative for driving for more resilient outcomes.”

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