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How do ESG investments create long-term value? #InvestmentInsight

How do ESG investments create long-term value? #InvestmentInsight

Thursday, 25 November 2021 -

It’s no secret that the growth of Environmental, Social and Governance (ESG) investments in recent years has been fundamental.

This has largely been fuelled by the climate emergency, leading to growing scrutiny of company practices with some governments mandating a change in companies’ and individuals’ behaviour.

The idea behind ESG investing is that corporations which respect these three pillars in their business practices will achieve long-term value creation.

From tackling climate change, to equal rights and animal welfare – you can select investments based on your values in a way that could help you achieve your long-term financial goals.

Appetite for sustainable investments
COVID-19 has undoubtedly heavily influenced some investors’ agendas, driving a re-evaluation of the environment and ‘what matters most’. Data from ‘The Power of Advice’ report[1] shows how for one in two investors (51%), the pandemic has fuelled their appetite for sustainable investments.

45% went further still, saying that they now only want to invest in ethical companies and funds. In fact, only 11% of the sample (across all generations) said they didn’t intend to invest in ESG investments over the next five years.

Younger people have a ‘key role to play’
Furthermore, 39% of clients said they expected to increase the amount they invested in socially responsible investments, 31% maintaining their current level and just 5% decreasing their spend.

Younger people have a ‘key role to play’ in the move towards sustainable investing, according to the report. It revealed younger family members (42%), societal pressures (47%) and media commentary (53%) were the top influences for people considering sustainable investing.

Every level of business decision-making
Once upon a time, the concept of ‘sustainability’ was confined to environmental and social issues, but it is now factored in at every level of business decision-making. The awareness of ESG has increased over recent years and these factors are becoming more important in the investment decision-making process of investors.

For many, the pandemic has prompted a change in financial priorities, accelerating the demand for responsible investing.

Source data:
[1] The Power of Advice Report – Pru part of M&G Plc – https://www.mandg.com/sustainable (2021)
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