ESG Investing – Why Now is the Right Time?

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Written by VentureXchange

June 5, 2020

Now is the right time to consider ESG investing, since the covid-19 has hit the world. Investors who can incorporate ESG, environmental, social and governance mandates into their investment portfolios will see the world embracing the goal of ESG.

Advisors’ use of funds focused on environmental, social and governance (ESG) factors is on the rise this year, with nearly four in 10 advisors (38%) indicating they’re currently using or recommending these funds in 2020. That’s up from 26% in 2018 and 2019, according to the 2020 Trends in Investing Survey by the Financial Planning Association, the Journal of Financial Planning and Janus Henderson. The survey found that nearly one-third (29%) of advisors plan to increase their use and recommendation of ESG funds over the next 12 months, up from 19% in 2019, and about 40% said that clients have asked about investing in such funds in the last six months.

According to Investment news latest article, ESG investing have emerged as the darlings of the financial markets since the start of the year. During the first quarter of the year, for example, when the S&P 500 Index was knocked off its decade-long bull market perch into bear market territory with a 23.7% decline, funds earning the highest ESG ratings by Morningstar averaged declines of 17.7%.

To align portfolios with a sustainable economic model, investors will look for low carbon volume to invest capital. Green energy think tankers report that doubling the share of renewables increases direct and indirect employment in the sector to 24.4 million by 2030. Renewable energy deployment affects the trade of energy-related equipment and services as well as of fossil fuels. Doubling the share of renewables in the global energy mix pays back in terms of economic growth, social welfare, job creation and overall trade balances.

Studies have already shown that the cost of capital is lower for companies that score well on Corporate Social Responsibility (CSR) metrics. That leads to the conclusion that companies who incorporate ESG investing communicate better with employees and have already secured more flexible and safe workplaces.

For the long term, ESG investing will lead companies for a better balance between near-term profits and long-term benefits for customers, employees, investors and the environment.

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