ESG Moves To Impact Investing

By Richard Lightbound, CEO, EMEA, ROBO Global

Just a few years ago, ESG (environmental, social, and governance) investing was making headlines for its ability to give investors a vehicle that allowed them to align investments with their personal values. Often labeled as ‘impact investments,’ funds and stocks that adhered to ESG guidelines were considered feel-good vehicles—but not necessarily the best options from a returns perspective. These were largely niche solutions targeted at Millennials, liberals, and anyone who put their hearts far above their wallets.

Related: What is ESG Investing?

Oh, how times have changed. That fact was made crystal clear to me when I had the opportunity to meet face-to-face with a large group of Australian investors at an ETF event in Sydney earlier this month.

I walked in the door expecting the usual conversations with investors that, in this case, ranged from small banks to large pension funds who are interested in exploring the ROBO Global Index Series. In the past, I’ve found myself sharing stories about the rising stars among our index members, the total cost of return of our index-based fund, and exciting research from our strategic advisors. This time it was different. This time, the first question I heard from nearly every investor I spoke with was this: “What is your ESG policy?”

It’s a fascinating shift to witness, and yet it’s no surprise. Robotics, automation, and AI—or RAAI—is, after all, naturally aligned with all things ESG. Robots being used in agriculture, energy, and recycling help protect the environment by saving water, minimizing the use of pesticides and other chemicals, and transforming natural resources into critical energy supplies. Innovations on the factory floor increase capacity and productivity and help keep humans safe by taking over a majority of the “dangerous and dirty” work that puts us in harm’s way. Advancements in AI are making it possible to transform healthcare, reduce greenhouse gasses, and improve energy storage. The list goes on and on.

It’s also no surprise that Aussies understand just how powerful that alignment with ESG is—and why it matters over the long term. Living on an island (large though it may be), Australians have long been focused on protecting natural resources and operating everything they do as efficiently as possible. Still, I was quite surprised at the focus on ESG and how rapidly it has become a top priority for corporate and institutional investors alike.

I suppose I should have seen the writing on the wall. In meetings with investors in the Netherlands, the majority of the large fund managers I’ve met with have a directive of investing only in funds with ESG policies. And this is not a superficial mandate. These investors want not only to know that the policy exists, but they also want to dig into the details to understand how our policy will drive advantages down the road.