Over half or 56% of investors plan to increase their environmental, social and governance (ESG) allocations this year, according to a new study by the deVere Group.
This would represent a reversal in the trend which has seen outflows from ESG funds over four consecutive quarters in both the US and Europe due to rising energy prices and political backlash.
Climate finance was a central theme at COP28, with studies showing more than $80 billion in capital has been mobilised for environmental research, development and projects.
Industry analysts believe that hundreds of billions more will emanate from private sources due to a raft of new regulations, requirements and opportunities.
However, recent estimates suggest the ecological crisis is costing around $390 million per day. This provides insight into how much more money is needed to effectively mitigate the impact of pollution, global warming and habitat destruction.
Meanwhile, previous market analysis has revealed that money flowing into green industries and technologies has been falling.
Nigel Green, CEO of deVere Group, which polled 800 of its clients worldwide, believes the increase is ESG investments is “not just a statistical blip” but a reflection of a “fundamental shift” in investors’ mindsets.
Green notes people are increasingly drawn to ESG investments for several reasons, including ethical considerations and wanting their capital to be a force for positive change.
He adds, “ESG investments allow them to channel funds towards companies that actively contribute to a sustainable and socially responsible future.”
Despite question marks over performance, Green says, “Far from being a sacrifice for moral high ground, ESG investments are proving to be financially astute.”
He points to numerous studies that suggest companies with high ESG scores tend to outperform the market.
For example, “Reuters has reported that ESG positive funds outperformed globally over five years,” he says. ‘Companies with robust environmental, social, and governance practices are better equipped to navigate regulatory changes, reputational risks, and operational challenges.
Investors are, therefore, drawn to ESG investments as a means of fortifying their portfolios against unforeseen risks.”
© Markets Media Europe 2024
