In recent years, the shift towards sustainable finance has markedly accelerated. Responsible investment, which considers the impact of ESG factors on risk-adjusted return and is aligned with investor values, has become key to the strategic agenda. In the wake of COVID-19, this trend will be further enhanced, not diminished.
- As a sign of its importance, more than 35 stock exchanges around the world have already issued (or are in the process of issuing) ESG reporting guidelines
- There are more than 3 400 open-end funds and exchange-traded funds globally that consider ESG factors in the way they invest. This does not include money market funds, feeder funds or funds of funds. Global inflows into such sustainable funds were up 72% in the second quarter of 2020 to USD 71.1 billion. Assets in sustainable funds hit a record high of USD 1.1 trillion as of the end of June, up 23% from the previous quarter [Morningstar Manager Research July 2020]
- Prior to COVID-19, the E of ESG was a powerful focus, as growing concerns about climate risk magnified interest in sustainability related investments that are seeking low carbon approaches and diversify away from fossil fuels. Many large financial institutions, private equity funds, hedge funds and institutional investors announced initiatives or funds geared towards sustainable assets and inclusive growth
- One of the effects of COVID-19 has been to also highlight the importance of communities and societal cohesion. We are likely to see a growing focus on social issues, including diversity and equality, as well as environmental ones with climate change remaining high on the agenda