ESG Investing: Growing Popularity in Focus
From the way we meet and greet friends to how people invest, let’s face it the worldwide pandemic has changed all of us.
According to several experts in the investment arena, something called ESG investing has experienced a lot of hype over the past 18 months, and it, too, might be due to COVID-19.
What is ESG?
“Environmental, Social, and Governance” or ESG in layman’s terms means generating a return on your investment without making the planet any worse off.
While its aim is financial; companies that engage in such practices of ESG investing — some experts say — by doing so might be adding risk to the performance of their portfolio.
But others like Nuveen.com feel differently and maybe the pandemic has breathed new life into ESG.
This type of investing might be here to stay as there is plenty of interest from all walks of life and many who are willing to take a leap of faith.
Why Choose ESG
But before you get out your wallet, regardless of its financial goals, ESG investing is still thought of as investing with only social goals in mind.
Surely the market had its shares of ups and downs in 2020 and 2021, but, if you’re not into saving the planet or are anti-war, ESG investing might be for you if you’re contemplating any future investing.
In the long term, the performance results of ESG funds appear to vary based on who is doing the analysis and how.
For instance, multiple studies suggest ESG funds do not outperform and recently, there have been ESG funds that have outperformed or “shined” during the COVID-19 crash.
The popularity of ESG investing
And as ESG’s popularity continues to climb, naysayers aren’t sold on ESG investing. For example, Venture capitalist Chamath Palihapitiya, according to one article said ESG investing is a “complete fraud.”
The comment was related to the goals of investors who were thinking about ESG policies, the article added.
Palihapitiya said, “… motive of JPMorgan Chase & Co. (JPM) regarding ESG is simply to get the benefit of being able to borrow money from the European Central Bank at negative rates.”
Outlook for ESG
As for the future of ESG investing, experts suggest its popularity will continue especially by millennial investors.
Results from a study by Allianz Life reported in August 2019, revealed:
- Millennials more likely to make investment decisions based on issues important to them (64% compared with 54% of Gen Xers and 42% of Baby Boomers)
- Nearly half of Gen Xers and Baby Boomers say they are interested in having some money in ESG investments, compared with 66% of Millennials
- When thinking about doing business with a company, all generations say social issues like diversity in the workforce and consumer protection are important
- Baby Boomers are more likely than Millennials and Gen Xers to say they want to participate in ESG investing to encourage companies to be better corporate citizens.
The performance of ESG investing during the pandemic has certainly made its way into the limelight and perhaps attracted a new group of investors who aren’t afraid to jump on the bandwagon.