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February 10, 2022 Sustainable Investment Becoming Mainstream Business Model
Over a period of just 10 years, ESG has grown from an abstract idea to a mainstream investment model due to the increased investor and consumer demand for higher standards and greater transparency.
The Covid-19 pandemic has hastened the shift towards ESG investing by focusing investors’ attention on the apparent vulnerability of the world’s financial systems. As a result, both investors and consumers have turned the conversation towards the consequences of global interdependence and the importance of sustainability.
85% of investors use ESG factors
The trend towards sustainable investing means that more investment professionals are including both the financial importance and pertinency of social factors in their analysis. According to the “Influences on Sustainable Investment” report produced by the CFA Institute, 85% of investment professionals now use ESG factors to get a clearer understanding of the companies in which they intend to invest.
US$35.5 trillion sustainable investments
According to the Global Sustainable Investment Review (2020), in Q1 2020, global sustainable investment reached an eyewatering US$ 35.5 trillion, a 15 per cent increase on previous two years. Sustainable assets under management make 35.9% of total assets, an increase on the 2018 figure of 33.4 per cent.
Worldwide sustainable asset growth
The growth of sustainable investments increasing throughout the globe (figures from 2018 to 2020) with Canada seeing the highest growth at 48 per cent, following by the USA (42%), Japan (34%) and Australasia (25%). The EU is in the process of ratifying the European Sustainable Finance Action Plan which will collate the growth and size of the sustainable investment market.
Principles for Responsible Investing (PRI)
Further evidence of the trend can be seen in the 29 per cent increase in new PRI network members (signatories) in Q1 2020, equating to an additional 20 per cent of assets under management.
Strategic Theme 2021-24
The uptick in membership is attributed to the widespread realisation that sustainable investment decisions don’t only impact real-world outcomes, they also shape the financial risks. The “Strategic Theme 2021-24” launched under the slogan “building a bridge between financial risk and real-world outcomes” is at the core of the PRI’s strategy.
The PRI provides guidance on the responsibility of investors in today’s global society and how to incorporate the required ESG practices and measure the resultant outcomes, whilst still delivering long-term growth for their clients.
The future of sustainable investing rests upon the role that industry leaders and investment professionals decide to play in response to global influences.
If you would like more information about sustainable investing and Abingdon Global Assets’ ESG investments, contact [email protected].
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