Money talks, and what it's been saying louder and louder is that we need to be directing money to industries that will help us create a just, climate-resilient world (like renewable energy). Climate change comes with a wide array of risks, and included in that is financial risk. And what do the banks, investors, super and pension funds not want to do? Put their money in risky situations or lose money.
Here are the numbers - according to CNBC - "Wealthy investors said they plan to allocate 41% of their portfolio to businesses actively pursuing environmental, social and corporate governance (ESG) policies by the end of the year. By the end of 2021, that figure is set to rise to 46%." I'm not the best with numbers, but this sounds like it's heading in the right direction!
Even with the extreme economic downturn that the world has faced this year due to the COVID-19 pandemic, sustainable investments have still come out on top! Investments focused on companies with strong environmental, social and corporate governance (ESG) principles have done better than more conventional investments in 2020 already. What does this mean? Change is happening, fossil fuels and other industries that exploit our planet and people are making less and less financial sense (to us, they never did but there are lots of people and companies who have profited off fossil fuels for a long time).
And there's another big shift that is helping push this change - generational shift! Millennials are leading the charge here because they are generally more focused on sustainability than older generations.
The pandemic has pushed companies and governments in many directions, and they've had to change footing and make new plans on how they want to emerge from this crisis. And there's momentum pushing for climate-strong recovery plans, ones that help uplift people and protect our planet. In a report by Morgan Stanley, they say that organisations that will succeed throughout and after this pandemic are ones that have gone the extra mile to look after their workers and the environment.
Even before the pandemic, "investors were looking at companies through the lens of environment" but now investors are looking at all aspects of environmental, social and corporate governance principles and holding companies to higher standards than before.
Early concerns about sustainable investments were that the economic return would be less than conventional investments, however, that conception is being changed and the world is heading into a more socially and environmentally aware economic situation. At least, this is something that Morgan Stanley is noticing in the top economic trends.
Check out this video below for more information:
What exactly is sustainable investing?
ESG investing, or sustainable investing, means that investments seek positive returns and impacts on society, environment and the performance of the business. There are different types, but essentially investing in fossil fuels or tobacco is a big no, whereas investing in renewable energy or companies that take good care of their workers gets the ESG investing thumbs up!
What can you do?
This is positive news because it proves that change is happening and some of the richest people in the world (or at least a high percentage of them) are looking towards a better future. (Even if we didn't get all of them on board for the sake of the planet and people on it, at least they're here now).
For those of us who don't have money to invest, we can make sure that the banks and super funds where we keep our money invest sustainably. Read this blog to see a full list of ethical and sustainable banks to switch to!