Sustainable investing reportedly topped $30 trillion at the start of 2018. This is not only a large sum, but also a 34% increase in two years – and more than double the amount in 2012.
What’s the World Economic Forum’s Sustainable Development Impact summit?
It’s an annual meeting featuring top examples of public-private cooperation and Fourth Industrial Revolution technologies being used to develop the sustainable development agenda. It runs alongside the United Nations General Assembly, which this year features a one-day climate summit. This is timely given rising public fears – and citizen action – over weather conditions, pollution, ocean health and dwindling wildlife. It also reflects the understanding of the growing business case for action. The UN’s Strategic Development Goals and the Paris Agreement provide the architecture for resolving many of these challenges. But to achieve this, we need to change the patterns of production, operation and consumption.
The World Economic Forum’s work is key, with the summit offering the opportunity to debate, discuss and engage on these issues at a global policy level. Clearly, many investors take this seriously now, shifting assets from conventional portfolios to those managed against Environmental, Social and Governance (ESG) criteria. The term “ESG” is now mainstream in the investment community. And while there is no “but” here, there is a “better.” We could do much better. And doing better is the only way that we could possibly achieve the ambitious UN sustainable development goals.
The full potential of sustainable investing has not been realized – yet
While “ESG” is a buzzword, we still have a long way to go until the volume of sustainable investments surpasses the volume of non-sustainably managed portfolios. Investors and asset managers are often put off by the complexity of the task. They have a hard time accessing, understanding, and integrating information about the ESG performance of companies into their decision processes and investment systems, which have been tailored for conventional financial information.
Fifteen years ago, there was barely any information of this kind available. Nowadays, the problem is not so much the quantity of information, at least not for companies in Europe and North America, but rather the quality and comparability. For example, the question: “Is company X performing better on gender diversity than company Y?” is impossible to be easily answered despite the seeming simplicity of the metric. In a case study, described in the World Economic Forum’s white paper Seeking Return on ESG, 15 companies from the fast-moving consumer goods sector used 22 different employee classifications, of which 16 were synonyms for “senior management”.
Read the rest of Katherine Brown’s article at The European Sting