ESG INVESTMENTS T
Roughly a third of all the inflows into
exchange-traded funds (ETFs) were into ESG ETFs. A current theme has been a lot of investors giving up on the idea that humans can beat computers at anything from chess to fund management, so this data matters. It shows that even though passive ESG funds were popular, investors had a lot of faith in active fund managers, too, so ESG is winning in both the passive and active stakes.
The ‘S’ in ESG climbed into the front seat with the ‘E’ There is no doubt that 2020 brought more widespread focus on our health and education, both at an individual and collective level. Covid-19 brought it home to everyone as hospitals filled, and schools and colleges shut their doors. When you combine this understanding with the proliferation of social media, and overlay everyone’s personal experiences, you create a situation where every investor in the world understands that companies that help us eat better food, work out regularly, provide sound educational tools and offer medical care to more people are going to be very important economic factors.
Environmental and social imperatives The pandemic helped to highlight some important environmental and social issues and
had a knock-on effect of people wanting something done about these problems. It might be that the damage we had been wreaking on the planet became starkly clear: as cars remained on driveways and planes grounded on runways, people enjoyed cleaner air and water and reconnected with nature. Also, our unpreparedness for the pandemic
resulted in governments spending monstrous sums on disposable PPE (personal protective equipment) and other items to help us get ahead of the curve. Social issues have been highlighted. Lower-income groups are disproportionately affected by the virus, and school closures have widened the education gap between children from different socio-economic backgrounds. The virus has brought into plain view disparities in our societies and problems with our environment, and people want these problems solved. This is a profound shift.
The acronym swamp There is no doubt that the acronyms and jargon that surround ESG have held us back and have prevented a lot of investors making a shift into this style of investing. It has created the misconception of ESG issues being a ‘trend’ or a ‘passing fad’. Many investors also wrongly believed that ESG was about leaving arms stocks out of your portfolio, but, thank goodness, arguments about whether tobacco or guns are worse than animal testing have largely left the arena. Investors of all stripes now understand that ESG is about investing in companies that either make the world better, or at least don’t make it worse. People are now much more switched on to the
drivers of sustainability and their economic impacts. It’s not about debating the rights or wrongs of specific companies any more. It is about consumer preferences (lots of people drive electric vehicles or follow a plant-based diet), employee values (people want to work for companies where they are properly looked after), corporate supply chains (companies want to work
“Every investor in the world understands that companies that help us eat better food, work out regularly, provide sound educational tools and offer medical care to more people are going to be very important economic factors”
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