Why ESG and impact investing are important for asset managers

  • Environmental: This encompasses aspects such as the consumption of non-renewable sources of energy (e.g., nuclear energy and fossil fuels), which are detrimental to the environment, as they lead to pollution and climate change and deplete natural resources.
  • Social: This covers human rights — child labour, women’s and children’s safety and development, engagement of multicultural community groups and improvement of relations with employees and stakeholders, among others.
  • Governance: This factors in management’s quality and effectiveness, resolution of conflicts of interest with peer groups and clients, promotion of transparency in key business processes, etc.
  1. Focus on long-term value creation: Companies are currently focusing on long-term wealth creation by incorporating sustainable practices (including ESG factors) into their day-to-day activities.
  2. Changing regulations, along with long-term liabilities: Businesses are often exposed to risks such as changing regulatory requirements and societal reforms. Insurance companies and pension funds have long-term liabilities and fiduciary responsibilities and seek to cushion blows from a volatile environment. By tying ESG and sustainable investments to their portfolios, they can meet their long-term commitments to clients and society, in general.
  3. Market potential of responsible investments: The potential for responsible investments is growing, fuelled by investors’ increasing focus on such vehicles, including socially responsible index funds.
  4. Investors’ access to ESG information: The increasing penetration of responsible investment and sustainable investment across global markets has raised investors’ awareness on mainstream practices, helping them make informed decisions on their investments.
  5. Regulation of ESG investments: ESG investments, accorded the highest importance, are promoted and regulated across global markets. The UN, which created Principles for Responsible Investment (PRI), is one of the primary bodies that have been regularly introducing reforms in the ESG space (such as carbon emission norms) and sustainable practices across industries. Their efforts have translated into exponential growth in assets managed by ESG-focused funds.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Acuity Knowledge Partners

Acuity Knowledge Partners

57 Followers

We write about financial industry trends, the impact of regulatory changes and opinions on industry inflection points. https://www.acuitykp.com/