ESG initiatives have grown rapidly within the past few years – especially in the finance industry.
Barron’s reported in February that assets in U.S.-based ESG ETPs increased 12% last year, to $9 billion. Globally, that number now exceeds $58 billion.
ESG = Environmental, Social, and Governance factors that comprise Sustainable investing. It is a generic term used in capital markets and used by investors to evaluate corporate behavior and to help determine the future financial performance of companies.
They are factors in investment considerations, used in risk assessment strategies incorporated into both investment decisions and risk management processes.
Many investors are not only interested in the financial outcomes of investments. They are also interested in the impact of their investments and the role their assets can have in promoting global issues such as climate action like managing a company’s carbon footprint and ensuring there are systems in place to ensure accountability.
One demographic that is particularly attracted to ESG investing is millennials 🎊🎉 According to a 2006 study, this generation is likely to trust a company or purchase a company’s products when the company has a reputation of being socially or environmentally responsible.
Half of those surveyed are more likely to turn down a product or service from a company perceived to be socially or environmentally irresponsible.
Also, ESG flows tend to be relatively steady, given investors are allocating for the longer term and tend to have strong convictions about their chosen strategies. In Europe, only three months have recorded outflows since 2017 – another reason we expect sponsors to introduce more ESG products.
Disclaimer: Consult your advisor to find a list of ESG-focused ETPs, from funds comprised of companies in the clean energy sector to those with a significant number of women in leadership 💁🏻♀️. #sustainableinvesting