For the first half of 2019, U.S. funds targeted toward environmental, social, and governance (ESG) factors attracted a net $8.4 billion, according to data from Morningstar. That already exceeds the previous record of $5.4 billion collected during all of 2018. Clients have now committed $35 billion to what are known as ESG funds since 2013.
- How will millennials influence socially responsible investing? How can ESG investing lead to greater social change through concrete actions like cultivating diverse boards and having comprehensive climate-change plans?
- While companies are increasingly able to quantify their actions on ESG issues, not many are able to translate this information into what it means to the business financially. How can businesses better assess the full impact of their sustainability practices to the bottom line?
- The past five years have seen explosive growth in “corporate green bonds” issued to finance climate-friendly projects by companies like Apple, Unilever, and Bank of America. How can green bonds influence this trend? If you were CEO of a company, how would you use green bonds?
- The U.S. student loan startup Sixup is an education finance platform that gives high-achieving low-income students—including first-generation and minorities—a pathway to attending four-year colleges and universities through a funding process known as securitization, or the financial practice of pooling various types of contractual debt.
- In 2018, the Seychelles government issued the first-ever “blue bond”— a $15 million bond to fund marine protection and sustainable fisheries.
- BlackRock recently predicted that the investment in ESG funds will rise to more than $400 billion over the next ten years.
What used to be viewed as a niche investment philosophy is now firmly planted in the mainstream, with everyday consumers using their dollars to support companies that align with their personal values around sustainability and social progressiveness.
ESG investing, used synonymously with sustainable investing or socially responsible investing, is an investment strategy aiming to incorporate environmental, social, and governance factors into investment decisions. Investment criteria encompass a set of standards for a company’s operations that socially conscious investors use to screen potential investments.
According to the Wall Street Journal, “The rush of new ESG money coincides with a crisis of investor loyalty for asset-management companies that try to outperform the market. Investors are shifting their money away from more-expensive stock pickers and embracing lower-cost alternatives that mimic market indexes.”
Calvert Research and Management, a subsidiary of Eaton Vance that manages about $17.1 billion and specializes in ethical investing, now has a 25- person team to ensure that both its active and passive funds adhere to ESG principles, according to a company representative. Five people on the team focus exclusively on engaging with companies to help them improve their commitment to ESG principles.
“People are astute enough to differentiate a company with a lot of experience, and a big team to do the work and evidence of a thoughtful, comprehensive strategy, from a firm that has just applied ESG to its prospectus and has someone working half time to just take ESG data from a third-party provider,” said Anthony Eames, Eaton Vance’s director of responsible investing strategy.
The concept that ties together these new investing models and strategies is straightforward: While they have generated competitive returns, it so happens that they all positively benefit society as well. Essentially what investors want is the performance promise of financial engineering combined with the assurance of a better tomorrow.