Environmental, social and governance (ESG) is a fast rising method of investing that focuses on ‘Investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return’.
Of course the idea of our money working hard for us, whilst at the same time working hard for our planet is appealing. However, the big question is whether this at the expense of our profits or is the case that as the planet evolves to become completely sustainable, impact investing is something that can drive investment profits.
Whilst this sector is still relatively new, it is gaining traction quickly, especially among millennials who are increasingly aware of environmental and social issues. This has prompted the launch of investment platforms like Tickr, who dedicate all their portfolios to supporting companies that are leading the way in making a positive global impact. ESG assets have doubled in the last year and this rapid growth looks set to stay however, can your investments really help change the world and can you expect these to perform as well as non-ESF funds over time.
The answer is, not only can they perform as well, but during the pandemic 64% of some of the best actively managed ESG funds beat their benchmarks, compared to 49% of traditional funds. This suggests that impact investments are outperforming traditional investments and the recent pandemic has given impact investing a boost, luring wealthy investors as it raises awareness of how fragile our economic system really is. Ultimately these strong returns will be the determining factor to persuade investors to focus on impact investing.
Of course it’s not all plain sailing and creating a ESG portfolio takes careful consideration and skill, and requires transparency from the companies concerned. However, if you’re wondering if your investments can really help change the world, this may help to convince you that this is the future of investing and you should aim to be at the foreground of this movement.