For many the term ‘ESG’ brings to mind environmental issues like climate change and resource scarcity. These for an element of ESG – and an important one – but the term means much more.
Investing in companies with better records on social issues and good governance pays according to the world’s largest asset manager, with those investments having proved to be more financially resilient during the coronavirus market crash.
British investors have opted for ESG funds over the last three years more than any other category of investment fund, according to Calastone’s latest figures. The appetite for a more sustainable and ethical approach to investing came in 2017, which coincided with the release of David Attenborough’s Blue Planet 2 documentary.
The Securities and Exchange Commission should take the global lead in mandating material ESG (Environmental, Social and Governance) disclosures, the SEC’s Investor Advisory Committee urged in May.
According to Schroders’ latest UK adviser survey, 65% of financial advisers claimed that it will increase the attention they pay to the ESG risks associated with investments; while 88% said Covid-19 has reinforced the importance of stewardship and using an asset manager who actively engages with company management.
Sustainable investing will sustain investment portfolios during times of market turmoil, according to BlackRock and Bank of America. Recent research from the firms shows that the majority of environmental, social and governance investments outperformed their non-sustainable counterparts during the Q1, 2020 market crash.