The inclusion of ESG (environmental, social and governance) issues within mainstream investment strategies has been gaining in prominence during the pandemic, according to new research – and it’s a trend that’s set to continue.
The global rise of ESG – a megatrend here to stay
ESG investment has been increasingly catching the interest of investors across the globe for several years now, due to consumers’ growing desire to know where their money is being invested and the wider social and environmental impact it is having. In fact, according to a recent survey from CoreData, 75% of professional fund buyers believe that all investment funds will be incorporating ESG factors into their strategies within the next five years.
Over half of global respondents in a recent Blackrock survey1 – 54% – consider sustainable investing to be fundamental to investment processes and outcomes. Respondents also plan to double their sustainable assets under management in the next five years – rising from 18% of assets under management on average today to 37% on average by 2025.
The global pandemic does not appear to have hampered this change, with only 3% of respondents expecting to delay their implementation of sustainable investing as a result.
The COVID effect
The CoreData survey also found that the rise of ESG investment has in fact been accelerated by the pandemic, with 80% of UK fund investors saying it has led them to focus more on ESG.
Founder and principal of CoreData, Andrew Inwood, commented:
“The pandemic has helped reset humanity’s moral compass and encouraged people to favour investments aligned with their beliefs and values.”
COP26 will keep fire burning
Environmental factors such as pollution, waste and climate change are among ESG investors’ biggest concerns, according to research2. This is likely to mean that coverage of the 26th UN Climate Change Conference of the Parties (COP26), to be held in Glasgow this November, will further boost interest in ESG investing.
Across the pond, new US President Joe Biden has committed to an ambitious new climate regime. At the end of the recent G7 meeting in Cornwall, President Biden said3:
“Transitioning the world to cleaner energy sources is urgent, it’s essential if we’re going to beat… global warming. It is the existential problem facing humanity, and it’s being treated that way. So we’re going to provide up to $2 billion to support developing company [sic] — countries as they transition away from unabated coal-fired power.”
This commitment is expected to raise climate change and the COP26 conference higher on the world agenda. Yet another reason why ESG is set to be a watchword for 2021 and beyond.