The rise of ESG investing has been attributed to the increasing number of ethical and sustainable investments. From 2005 to 2020, the number of sustainable investments has increased by 456%. This is a clear indication that the traditional investment norms are starting to change.
Although ESG investing has been around for a long time, it is considered to still be in its infancy and still has a long way to go before it becomes mainstream. Some of the most prominent trends in ESG investing include the following:
Fighting Climate Change
The Paris Agreement was made a key factor for investors and businesses to focus on when it comes to climate change. ESG investments are expected to continue to grow as the Biden administration made re-joining the agreement a priority. The goal of the Paris Agreement was to limit global warming to two degrees Celsius.
The agreement made it clear that the governments of the world would have to make their businesses reduce their emissions. Since its inception, many companies have already brought amendments to their policies or faced the consequences of their actions. However, despite the various steps that the agreement has taken, only 16% of IMI companies are currently aligned with the regulations that are designed to meet the global temperature target of 2 degrees Celsius. The second target of 1.5 degrees Celsius per year was also set by the agreement.
Combatting Social Inequality
In response to the various social issues that have been identified as contributing to the rise of social inequality, employees around the world have had enough. This issue directly affects the decisions that investors make when it comes to investing in companies. In the coming years, various factors such as the pandemic and the increasing number of companies that have to address the issues of pay disparity and employee relations will be brought to the forefront.
Now that people are more aware of their rights, investors are keen on making their companies contribute positively to the social issues that are affecting the world. By doing so, they can see a rise in their stock prices and help their employees improve their productivity and develop new ideas.
Unfortunately, failing to do so can lead to various negative impacts such as social boycotts and worker strikes. This can also lead to the reduction of employee motivation and innovation.
A Focus on Biodiversity
Due to the alarming effects of the biodiversity crisis on the world’s ecosystem, investors and policymakers have started to take it more seriously. In response to this, a United Nations conference was scheduled to occur last year in China to discuss ways to protect the world’s biodiversity. The conference was expected to bring together various government agencies and private organizations to discuss emergency measures to safeguard the environment. However, since the conference was not able to take place last year due to the global pandemic, it instead took place in May of this year. This was a significant event for the business community, as it provided them with an opportunity to discuss the various threats that are affecting the environment.