ESG investing is here to stay and has undoubtedly gained popularity in recent years. Not only did Covid-19 create a global health crisis, it also put financial markets into a whirlwind. There is no doubt that the pandemic was an absolute tragedy, although it has also highlighted the importance of shining a spotlight on companies who focus on environmental, social and governance factors (ESG).
ESG investing however is no new topic. Even before the pandemic, sustainable investing was rapidly growing in popularity with investors across the globe. Here at GSB Capital, we have been focused on ethical and sustainable investments from our beginnings. ESG is the core of everything we do. It’s our core belief that ESG principles enhance and improve both investment returns and real-world results. With a growing tide of people wanting their money to do well, we as investors and capital managers must take full responsibility for change. Responsible investing is therefore paramount, directing everything we do, from portfolio construction to company engagement.
Research carried out in 2021 also shows how ESG stocks demonstrate resilience during bear markets. We observed asset prices taking a hit during the start of the pandemic, although ESG investments did better than most.
Influenced by younger generations to invest responsibly
We have witnessed a real rise in interest in ESG investing, even throughout the pandemic. Clients are now coming to us wanting to know that their money is being used as a force for good. When the younger generations in your family ask how you are helping save the world, can you confidently say your investments are ethically positive?
The ever growing questions around sustainability at the dinner table from the younger generation are now a common topic within client reviews.
These investment decisions also allow high-net worth individuals and their families to discuss their non-financial ambitions. For example, allowing their actions and investments to fight climate change or supporting ethical changes.
ESG investments are now outperforming
If investing in sustainable businesses is not enough reason for you to invest, it’s time to put to bed the long-standing misconception that ESG investments come with lower returns. Majority of investors that embrace sustainability have actually outperformed people who do not. Companies embracing ESG principles are also identified to score highly in other areas. Many portfolios with significant ESG scores perform significantly better.
Sustainability is cheaper for long-term investing goals
Until Covid-19 arrived, the substantial financial results of companies with high ESG ratings attracted investors’ interest. This pushed stock prices up and made the shares rise in price.
Although the pull back in asset prices witnessed recently has made ESG stocks hold value for investors here for the long-game, seeking to grow their sustainable investing portfolio. The present market is a unique moment to add high-quality ESG companies to your portfolio, if you’re a long-term investor.
ESG investing is here to stay
Most investment trends come and go, although the movement driving the importance of sustainable investments is here and here to stay. Incorporating investment trends is an excellent way to prepare your portfolio for imminent changes within the economy. A long-term trend that is here too stay is the transition from fossil fuels to renewable energy sources. Artificial intelligence (AI) also shows signs of further growth, carrying out tasks such as cleaning and caring for the elderly. Jumping on these trends as early as possible will allow you to future proof your portfolio.
The way we invest must become a force for good. By thinking carefully about how and where we are all investing our wealth, we can influence the strategy and direction of influential companies to develop into better versions of themselves. We are here to ensure positive decisions are made with your money. Contact us today if you would like to review your portfolio and ensure you are investing your wealth sustainably, or if you would like to start your ESG investing journey.