ESG Considerations Gaining Traction Amongst Investors

Environmental, social, and governance investment strategies are gaining traction among the investment community, notably younger investors who are more amenable to sustainability initiatives.

“Investors plan to move funds to support companies with a positive ESG rating or impact,” according to a study conducted by EIS fund OnePlanetCapital, Bloomberg reports. The study projects investments in the ESG market will double in 2021, with about 12% of investors expected to shift to ESG related funds.

“ESG is now a key factor for investors when making decisions about their portfolio,” OnePlanetCapital said, adding that research is “suggesting investors are becoming increasingly concerned about global environmental issues such as climate change.”

For example, activist investor Bill Ackman, CEO of the hedge fund Pershing Square Capital, recently spoke to the importance of ESG investing, arguing that sustainability is “fundamentally aligned with running a successful business.”

“As consumers and other corporate customers have become increasingly educated on matters of ESG, they have begun to avoid companies that contribute to climate change or do not treat their employees well, while rewarding companies with their business that have sustainable and responsible policies,” Ackman said in a shareholder letter.

The Eurozone has been pioneering the push toward sustainable investing. In early March, the European Union Sustainable Finance Disclosure Regulation became effective, requiring sustainability-related disclosure requirements on financial services institutions, including banks, insurance companies, pension funds, and investment firms.

Meanwhile, in the U.S., President Joe Biden is expected to roll back a Trump administration-era Labor Department rule that required “plan fiduciaries to select investments and investment courses of action based solely on financial considerations relevant to the risk-adjusted economic value of a particular investment or investment course of action,” rather than weighing ESG factors.

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