The Sustainable Investing Landscape

Watch: What is ESG?

  • ESG isn’t just about investing. It is also about ensuring that ESG factors influence every element of the culture and operations of a business.
  • There are different ways to incorporate ESG factors into investing:
    • Traditional investing
      • In a standard investment approach, the investor’s primary objective is simply to meet their own financial goals.
    • Exclusion-based approaches
      • In an exclusion-based approach, an investor chooses not to invest in financial products that conflict with their values. For example, an investor may exclude fossil fuel providers from their ‘investible universe’.
    • ESG integration
      • For investors wishing to go a step further on ESG, it’s possible to integrate it more deeply into an investment approach. This may involve moving beyond simple exclusions to actively identifying and investing in companies that are industry leaders on ESG.
    • Thematic investing
      • Thematic investing involves investing around specific ‘themes’. For example, an investor who is particularly concerned by deforestation may choose to specifically invest in companies that are not involved in this practise.
    • Impact investing
      • Impact investing means investing with the goal of achieving specific, tangible outcomes, rather than simply a general commitment to ESG principles.

How is ESG changing the investing landscape?

  • In 2020 €1.2 trillion in European assets was invested in ESG strategies (11% of the total sum of European assets).
  • Increasing investor demand has meant that investment in sustainable assets has more than doubled since 2018.
  • Europe is leading regulatory reforms designed to make sustainability mainstream and fight green-washing.
  • Despite its growth, sufficient data is not being collected on ESG. This can be addressed through greater regulation.
  • There is a need for clear, generally applied standards and labels on financial products so that investors have a clearer understanding of the true ESG profile of a product.

Watch: Socially responsible investing summary

The best and worst asset managers (in terms of ESG)