ESG trends(Environmental, Social, Governance) investing seems to be everywhere. In fact, it has gone mainstream in the last few years. In the consequences of the pandemic crisis, more investors are considering ESG factors in order to bridge the gap created by COVID19. Social issues are more visible than ever and remain at the forefront. The risk or return opportunities in socially responsible investing, changing investors’ preferences, and the availability of new ESG-focused financial products are the driving forces behind the investors considering ESG approaches.
With such huge information being produced regularly, it becomes challenging for the investors to create strategies to enter the ESG market. Thus, here we have compiled the key ESG trends investors should watch out for in 2021-
S Grows In Importance:
Actions On E, S, and G remain essential to the corporate reputation. However, given the social implications of the pandemic, improving society is the top priority for MNCs. Companies should continue focusing on creating safe working conditions and adapting new operations to improve sustainable business practices. As companies are assessed based on their performance on ESG issues and the net benefits they bring to society, there is more emphasis on ESG.
If a company doesn’t treat their staff fairly, gets involved in corruption scams, or runs out of natural resources, it reflects a negative value creation. As consumers, employees, or the public, if you don’t pay attention to what a company stands for, it will be like shooting yourself in the foot. Thus, looking at societal issues, along with E and G issues, is crucial for a company.
E Beyond Climate Change:
Investors have been trying to align with the Paris Agreement for many years. They have focused on measuring the Greenhouse Gases (GHG) footprint and aligning the investments with meeting Net Zero Carbon targets.
In addition to the environment, other topics, like biodiversity, water pollution, etc., are gaining momentum. The reason is, biodiversity and ecosystem services affect the economic value generation and have implications on sectors like food and beverage, construction, and more! Thus, in 2021, you can expect to see a strong appetite focusing on not just one aspect but overall nature protection.
Healthcare On The Forefront:
There have been inequalities in healthcare access and affordability for many years; the pandemic over the past year has highlighted these issues. This is something industries should keep an eye on. But health concerns don’t end with the work-from-office or the ease of safety guidelines.
Every industry needs to continue making efforts to address its employees’ physical and mental health after the pandemic. There should be flexibility policies in the event of COVID19-exposure and adequate vaccine requirements. As an ESG investor, you should look for companies that are already focusing on emerging social issues and taking steps to address them.
More Diversified ESG Industries:
It won’t be wrong to say that ESG is on the top of the priority list for companies. However, no two companies are the same. But the good thing is, there are high chances for a more diversified ESG portfolio. You need to do some research about the industry you are considering. One important thing to keep in mind for smart ESG investments is to understand the most prevalent issues that are most important to consumers and companies. Get more specific in your research in order to pick the right company to invest in.
More Transparent ESG Strategies:
Human beings naturally understand and know the information that interests them or meets their beliefs or values. If you are new to ESG investing, start with the companies you know and believe in. You will be able to find the best ESG investment opportunities in the areas you know well. Furthermore, corporate ESG transparency is on the rise. Having a quick look at the company websites will tell you which ones are worth your time. Nowadays, companies have a customer-friendly sustainability webpage that provides viewers with an overview of the sustainability commitment.
ESG investing will continue to grow in the coming years. As a result, companies are backing up their ESG commitments with data-driven results. Investors should pay attention to the authenticity of a company’s ESG performance and the future ESG promises before they consider investing.