According to new research from the Global Sustainable Alliance (GSA), Sustainable and ESG (Environment, Social & Governance) is now a staggering $35 trillion dollar investment sector and represents globally 35% of all professionally managed assets.
In March 2021 we wrote an article that talked through ESG investing and types for consideration, which prompted many questions around the value of this type of investment mandate.
There is a perception with some people that sustainable investments have always come at a discount, that is people were prepared to accept a lower return for doing good. This may have been the case 10 years ago when the investment landscape was limited but roll on a decade and even the world’s largest companies have changed their view and positioning.
What has the last 10 years taught us about sustainable and ESG investing?
Mega-trend of climate change – there has been a huge move and focus on plastic waste reduction – recyclable and focus on sustainability and pollution issues in our community.
Acceptance of company boards – The implementing of sustainability policies within our corporate governance structures and the internal push from employees to make sure best practices are being adopted.
Millennials are leading the way – with 95% actively interested in sustainable investing according to research conducted in the US by the Global Sustainable Alliance, professional managers are now taking notice.
Research from GSA tracks the percentage of invested funds across all mediums with a sustainable bias, with the 2020 report containing some interesting reading with current global rates at 35% of all invested funds – a 15% rise in the last 2 years. Europe is tracking at 42%, Australasia at 38%, US 33%, Japan 24% and surprisingly Canada is sitting at 60%.
So, what does this all mean when trying to invest in Australia?
In working with our research team, there are “five broad categories” of investing that we discuss when working with our clients.
1. Traditional – typically those that are seeking to achieve a stated investment outcome, but with little or no regard for ESG factors
2. Aware– investors who want to take into consideration a broader range of factors including ESG
3. Integrated– investors that expressly wish to consider the ESG factors which materially alter the funds to invest in
4. Thematic– investors seeking an investment outcome that includes an explicit ESG objective – both measurable and reportable
5. Impact– investors who target investments aimed at generating a positive, measurable social and environmental impact, alongside with a financial return.
The range of Responsible Investment (RI) Issues is broad but once broken down into the ESG areas, investors can generally start to narrow down their focus. As an example: “Environmental” includes Climate change, Sustainability, Biodiversity and Water, Pollution and waste issues; “Social” covers Work and Safety, Human Rights and community standards; whilst “Governance” includes the issues of Management Structures, Governance and ethics. All of these sectors further break down into issues that people may want to focus on. We are finding climate change issues such as Fossil fuels, Sustainability issues of renewable energy and Community standards such as Gambling, Tobacco and firearms are leading the conversations we are having with our clients.
At Boutique we understand that sustainable and ESG investing sector can be confusing. Good conversations with your Financial Adviser about what is important to you and your family is the first step to get the outcomes you and your family want.
Contact us for an obligation free discussion on how you can make a positive impact to your community with your money.
Source: Zenith Research Global Sustainable Alliance GSIA | (gsi-alliance.org)
Gary Hasler is the Managing Director of Boutique Advisers and works with highly successful individuals and families, providing strategic financial advice. Gary specialises in working with generational family businesses, executives and family office clients as well as high level professional athletes. Gary is passionate about working with Boutique clients in a collaborative way, providing clarity and confidence, and helping them navigate their financial life.