Proponents of ESG investing advocate for investor portfolios to reflect a vision of our common future—the world we aspire to create—since the collective capital of individuals shapes the reality in which we exist.
E – Environmental pertains to a company’s relationship with the environment, including policies regarding climate change, CO2 emissions and other pollutants, water resource usage, the application of renewable energy sources such as solar and wind energy, as well as ‘green’ technologies, products, and infrastructure.
S – Social. The social component relates to human interactions, including a company's corporate culture, relationships with clients and partners, and the overall impact on society. A high standard excludes exploitation and inequality on ethnic, gender, and similar grounds.
G – Corporate Governance. This aspect should be transparent, exclude conflicts of interest, and be oriented towards shareholders rather than management interests.
ESG investments are gaining momentum. In 2016, global ESG investment assets reached $12 trillion, representing a 34% increase compared to the previous two years, and this was merely the beginning.
BlackRock, which manages assets totaling $7 trillion, launched 23 new ESG funds just in the period from January this year. In the first quarter of 2020, the ETF giant iShares attracted $11 billion—double the $5 billion it gathered for the entire year of 2019.
Experts note that the Covid-19 pandemic may drive an increase in ESG investments.
