On the way to the mainstream: the future of ESG investments [Download].

Over the past decade, there has been a peaceful revolution in the world of investment; Now environmental, social and personality (ESG) investments are becoming major. By the end of 2016, ESG investment strategies accounted for approximately a quarter of all professionally managed assets, and our research suggests that this number will increase.

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Although responsible investment has gained momentum since the 2008 financial crisis, two major agreements have been a turning point for the movement: in September 2015, world leaders led the UN. The Sustainable Development Goals (SDGs) were signed, followed by the Paris Agreement on Climate Change. Designed to address the most pressing issues facing humanity, including climate change, severe hunger and poverty, these ambitious charters require more than $ 7 billion a year in investment (or twice as much as the US federal budget) – mainly in developing countries.

The rise of private finance is encouraging. During the period in which these agreements were accepted, the amount of assets under the Liability Investment Principles (PRI) increased by 40%. Institutional investors – including the world’s leading sovereign wealth funds, pension funds and insurance companies – are increasing their ESG-based investments. Philanthropic foundations are now linking their investments to SDGs, and in the United States, with the current government withdrawing from the Paris Agreement, nearly 2,000 investors and companies say, “We are still in it.

Where financiers are not forced to act, they are pushed. The same institutional investors are demanding more exposure to ESG issues or taking action through shareholder resolutions; Some have begun to divert attention from controversial sectors such as tobacco, weapons, and coal. Regulators in France (soon across the EU) will require companies and financial institutions to report their ESG performance; In the United States, companies are increasingly facing climate-related lawsuits.

There are also very positive news to report. Investment and index performance data show that combining ESG information can actually increase returns and reduce volatility; Our survey participants and the investors we spoke to agree that integrating ESG information can improve the risk-return profile of investments and give investors a “new image”.

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