FLASH FRIDAY: The Dawn of Sustainability on Wall Street

FLASH FRIDAY is a weekly content series looking at the past, present and future of capital markets trading and technology. FLASH FRIDAY is sponsored by Instinet.

On Wall Street, sustainability used to refer only to the ongoing viability of a business. But sustainability is now quite the buzzword for its modern meaning, which can be stated as meeting the needs of the present without compromising future generations’ ability to meet their needs. 

To wit, we searched Traders Magazine archives, which go back more than 20 years, to the late 1990s. There are only 61 articles that mention the word sustainability, of 17,717 total articles in the Traders digital archives. And 41 of those 61 articles were published in 2019 or later.

The earliest mention of the word sustainability is from an October 2009 regulatory commentary, which states: “…the (Senior Supervisors Group)’s report is particularly dismal in its discussion about the sustainability of risk management improvements…”

Then there was an August 2012 article about startup hedge funds: “…if that firm can also demonstrate consistency and sustainability, it will end up being the one with the investment dollars…”

The first reference to sustainability in the modern sense of the word was a December 2016 Brown Brothers Harriman report about ETFs: “This year also saw an increase in environmental, social, and governance (ESG) ETFs, with about a dozen new products coming to market in the US; however, only 37% of investors stated that ESG factors are important when selecting an ETF. In our European ETF Investor Survey earlier this year, 52% of respondents said the same. This may reflect different regulatory pressures in Europe that may favor ESG factors, plus a difference in cultural views regarding sustainability…”

That 2016 article was prescient, as it went on to say: “we do think that interest in ESG products in the US may increase as millennials and younger generations – many of whom are more comfortable using ESG screens in their portfolios – start making more investing decisions.”

How prescient? Well between 2018 and 2020, total U.S.-domiciled sustainably invested assets under management, both institutional and retail, grew 42%, to $17.1 trillion, up from $12 trillion, according to the Forum for Sustainable and Responsible Investment. And the widespread consensus is that the arrow is pointing up.

Sustainability initiatives are everywhere. Last year a Reuters article “’Green is good.’ Is Wall Street’s new motto sustainable?” detailed Goldman Sachs’ efforts in the area. “Large companies are pushing sustainability up and down their supply chains. Governments are getting more active and engaged. You’re seeing it everywhere,” said (John) Goldstein, head of the firm’s Sustainable Finance Group, which was formed (in July 2019). “You can see and feel the acceleration going on.”

Many firms are adding Chief Sustainability Officers or the like to their C-suites. 

Markets Media Group and Instinet will give out a Positive Change Award for Sustainability in the 2021 Markets Choice Awards.

The signs are everywhere. Sustainability doesn’t have much of a past on Wall Street, but it has a bright future.