STANDING next to a plaque in the pure silent outback of Australia, the statement opened with ‘when the first Europeans came here…” with no mention of the indigenous people who had lived there for 45,000 years before. They say history is written by those in power, but it’s also written in the present tense in front of our eyes.
Ethical investing, or green investing, made sense, but had a marketing perfume forcibly attached to it of a smelly tree hugging person, keen to stop the world moving on. Ethical screening of investments was also synonymous with investment under-performance and perhaps justifiably, but whilst hierarchy and leaders flew around in helicopters and Trumpety jets, the disparity of message-to-action left most investors apathetic at best.
Its all change now though. We are in a world where we either just roll over and accept the extraordinarily blatant double standards of politicians, elite corporations and countries, or put our money where our mouths are and take action, and that has gathered exceptional pace with Environmental, Social and Governance (ESG) investing.
ESG investing has rocketed with its market share comparable to that of the movement into passive investing. Up 60 per cent from $655 billion in 2012, to over $1 trillion last October, year, industry experts have it earmarked now as a key tipping point, with 80 per cent of millennials interested or very interested in socially responsible investing.
Powerful documentaries such as John Pilger’s ‘The New Rulers of the World’ have catapulted awareness to the unscrupulous nature of governments and corporations we are supposed to trust, and investors are using their power to not only influence, but also make superior returns.
The FT reminds us of more than 2,200 academic studies on the relationship between ESG and financial performance. The answer: Over 90 per cent found that ESG has a positive or neutral impact on performance.
Think about ESG and how it makes sense. When assessing a company’s environmental, social and governance standards, we have to consider factors that make the company sustainable. These factors drive standards that are sustainable and forward thinking, better managed, have a understanding of risk, are leaders in their field and meet high standards. If they are ticking ESG boxes they are very investable as they have superior business models.