Environment, Social and Governance parameters are used by the new generation of investors for judging companies and choosing where to put their money. In other words, today’s investor prefers to invest in companies that act responsibly towards the environment and the community in which they function, while ensuring ethical governance within their corporate structures. There has been a shift in investor values and sentiments towards socially responsible investing (SRI) and impact investing. In addition, there has been a greater focus on climate change and its impact on our lives worldwide, leading to the theme of “conscious investing” gaining traction in 2021.
Data from the global fund-flow tracker, EPFR, revealed that equity funds that offered SRI or ESG investing saw record inflows of $168.74 billion in 2020, a huge jump from the $63.35 billion seen in 2019. In addition, a BlackRock survey in December 2020, conducted on 425 investors across 27 countries representing an estimated $25 trillion in assets under management (AUM), revealed that investors plan to double their ESG investments over the next five years. This would take the ESG AUM from 18 percent in 2020 to 37 percent by 2025. As of early 2021, about $2.96 trillion had been invested globally with an ESG focus. Europe leads in terms of growth in sustainable assets, followed by the Americas and Asia Pacific.