ESG investing is here to stay and has undoubtedly gained popularity recently. Not only did Covid-19 create a global health crisis, but it also put financial markets into a whirlwind. There is no doubt that the pandemic was an absolute tragedy. However, it has also highlighted the importance of shining a spotlight on companies that focus on environmental, social and governance factors (ESG).
ESG investing is no new topic. Even before the pandemic, sustainable investing was rapidly growing in popularity with investors across the globe. At GSB, we have been focused on ethical and sustainable investments from the beginning. ESG is the core of everything we do. Our core belief is that ESG principles enhance and improve investment returns and real-world results. With a growing tide of people wanting their money to do well, we must take full responsibility for change as investors and capital managers.
Responsible investing is paramount, directing everything we do, from portfolio construction to company engagement. Research conducted in 2021 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
Even throughout the pandemic, we have witnessed a real rise in interest in ESG investing. 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 for you to invest, it’s time to put to bed the long-standing misconception that ESG investments come with lower returns. The majority of investors that embrace sustainability have 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 pullback 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 here is the transition from fossil fuels to renewable energy sources. Artificial intelligence (AI) also shows 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.
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Ross Whatnall is CEO and co-founder of GSB and a highly experienced private client director. Ross holds many insurance and investment management qualifications, including CISI, CII, LIBF and CFA. He started his career in private banking with HSBC in the UK before moving to the UAE in 2013 to focus on serving his private clients.