ESG is investing on track for further profits since bumper 2021

Indeed, this year has been a very difficult year for investing in environmental, social and governance (ESG).
By November 30, last year, ESG-focused funds around the world had a record $ 649 billion, with $ 542 billion and $ 285 billion in 2020 and 2019, respectively, according to the latest Refinitiv Lipper data. Has flowed into these funds.
Currently, global sustainable investment is estimated to range from $ 35 trillion to $ 40 trillion, but ESG funds currently account for 10% of global fund assets.
Extreme weather events have become more frequent and events that highlight social justice issues have helped ESGs rise to the top of the agenda for investors, businesses and policy makers.
The MSCI World ESG Leaders Index rose 22% in late December, while the MSCI World Index rose 15%.
Investors have also worked hard to challenge the company’s ESG credentials and culminated in a groundbreaking board challenge to oil major Exxon Mobil Corp.
According to the Sustainable Investments Institute, support for social and environmental proposals at US companies’ shareholders’ meetings rose from 27% in 2020 to 21% in 2017 to 32% in 2021.
According to Ripper, 59% of ESG funds’s $ 6.1 trillion are held in Europe, the Middle East and Africa, reflecting the region’s previous acceptance of investment trends.
However, with growing concerns that only a small portion of ESG assets are genuine ESG investments, tighter regulations are needed to eradicate false claims by fund managers.
Such warnings become more frequent as the mood surrounding ESGs changes.
Some industry insiders have leveled greenwashing allegations against former employers. Asset managers are also beginning to consider how to label and sell ESG funds to avoid being named and embarrassed.
Aggressively, regulators are responding to new pressures by prioritizing ESG disclosures.
The US Securities and Exchange Commission is asking money managers about the ESG classifications used for funds and is expected to strengthen guidance on corporate disclosures such as carbon emissions.
The European Commission has also completed most of the “Sustainable Financial Classification” rulebooks that can label business activities as climate friendly.
Indeed, it was an ESG flow bumper year. But it is not clear what that means for the environment, social justice, and good governance.
Holtens Bioy, Global Head of Sustainability Research at Morningstar, said he suffers from a lack of clarity about investment strategies, like mean reversion, that is being marketed as a way to protect the planet.
But the amount of skepticism does not dent the flow of cash.
At the end of the third quarter, European assets under management, classified as sustainable, increased by 134% compared to the end of 2020, according to Morningstar data. In the United States, the increase was 40%.
Global ESG assets are expected to exceed $ 53 trillion by 2025, more than one-third of the total assets under management forecast of $ 140.5 trillion, according to Bloomberg Intelligence. Europe accounts for half of the world’s ESG assets, while the United States is currently rising fastest and could dominate this category after 2022.
According to BI research, the next wave of growth could come from Asia, especially Japan.
Undoubtedly, ESG is clearly a money machine in the financial industry. However, it is not always easy to identify the impact on the real world.