The importance of ESG to every investor
On news that global sustainable fund assets have almost doubled in the six months through to September, I believe every investor now needs exposure to environmental, social and governance (ESG) investments in order to grow wealth over the long-term.
Global ESG assets are on course to surpass the $53 trillion mark by 2025, as per a Bloomberg Intelligence report, representing over a third of the $140.5 trillion in projected total assets under management.
Back in January last year, we said ESG would be this decade’s ultimate investment megatrend. Naturally, this was even before the Covid crisis hit, which has accelerated the sustainable investing boom, as our planet’s health and how in turn it affects our health, was radically brought into focus.
Beforehand, ESG investments were often thought of as a ‘quirk’ or ‘nice to have’, but now they should be part of everyone’s investment portfolio for a number of reasons.
First, typically, they deliver a legitimate diversification tool, allowing investors to make the most of opportunities and sidestep risks.
Second, funds investing in entities with strong ESG credentials have outpaced their targets over the past few years. As such, from a risk management viewpoint, including these businesses is evidently a sensible decision.
Third, a monumental shift has taken place in terms of corporate behaviour. How companies approach ESG issues, and the value given to them, has already permanently altered. The ESG factors are already entrenched in the global economy, which is only set to grow in the future. And, of course, investors should get behind the early advantage concept.
And fourth, the past 18 months have highlighted how we have a moral obligation to back and fund entities that support the wellbeing of the planet and society.
In October, we revealed we are doubling our commitment to position $2 bn of assets under advisement into ESG investments, which followed on from the announcement that we are aiming to have $1bn in socially responsible investment vehicles within five years. I’m also extremely proud that deVere is one of 18 founding signatories of the UN-backed Net Zero initiative, the international alliance of finance powerhouses that will help accelerate the transition to a net-zero financial system. This reinforced our commitment to aligning all relevant products and services to achieve net zero greenhouse gases by 2050 and to set meaningful interim targets for 2025.
The pros of exposure to ESG investments in investment portfolios is now unquestionable. Not seeking profits with purpose may negatively affect wealth accumulation over the long-term.