Investors Looking Beyond Climate Change with ESG Investments | ETF Trends

When looking at socially responsible investments, many focus on the ‘E’ aspect of environmental, social, and governance principles, but the ‘S’ factor is beginning to take on a larger role and may continue to do so in 2021.

Social issues like racial disparities, worker pay, and safety issues, and fair access to health care have garnered greater attention, and corporate America has become more socially conscious of these factors, adding to the momentum behind ESG investments, Bloomberg reports.

“ESG was firmly put on the decision-making table in 2020 after being a strategy that was ‘nice to have,’” Felix Boudreault, managing partner at Sustainable Market Strategies, an ESG research firm in Montreal, told Bloomberg. “It’s now a performance issue that senior executives must address, whether they believe in it or not.”

Meanwhile, investors are putting pressure on companies to address racial and gender diversity, along with climate change. For instance, BlackRock Inc., the world’s biggest money manager, is supporting more shareholder proposals that hold directors accountable on these issues. The company also said it will focus on issues that affect biodiversity and the natural environment.

The industry is also branching out of the environmental or climate change focus and looking through a broader lens. For instance, a growing number of investors are focusing on the threat of biodiversity loss, which has a wide reaching economic effect since more than half of the world’s total gross domestic product is dependent on natural resources, from food to ingredients for medicine.

“Biodiversity loss and climate change present critical financial and economic risks,” Jenn-Hui Tan, global head of stewardship and sustainable investing at Fidelity International, told Bloomberg. “Investors have a key role to play in protecting biodiversity and creating positive biodiversity outcomes. While good progress has been made in our understanding around the pricing and integration of climate-change risk, it’s now incumbent on us to learn to price natural capital correctly.”

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