Economic turmoil and the collapse of oil prices have pushed responsible investing to the fore, according to global independent financial advisory deVere.
A shift towards ESG was already taking place, however, the COVID-19 crisis has kicked the transition into overdrive, catapulting responsible and sustainable investing to become “mainstream”.
“At the start of 2020 I said that environmental, social and governance (ESG) investing would reshape the investment landscape in this new decade – but this phenomenon has been dramatically and irreversibly accelerated by the current situation,” deVere chief executive and founder Nigel Green said.”Even before the start of the COVID-19 pandemic, ESG investments often outperformed the market and had lower volatility over the long-run.”
Companies with robust ESG credentials around the world outperformed during the recent stock market crash, he said.
“Clearly, this is going to increasingly attract both retail and institutional investors seeking decent returns in turbulent times,” Green said.
Record-low oil prices, which he argued, are not likely to rebound to pre-crisis levels in the short-term, have also helped to drive interest in ESG investments.
“This is because ESG funds circumnavigate oil stocks, so their performance will not be adversely impacted by the fall in share prices,” Green explained.
The COVID-19 crisis had been eye opening for investors who lagged behind the growing movement towards ESG or responsible investing, he said.
“The current situation has acted as a wake-up call in many respects,” Green said. “It underscores that human health is reliant upon healthy ecosystems; that we need to ensure the sustainability of supply chains; and that those companies with robust corporate governance and good business practice fare better in difficult times and are ultimately best-positioned for the future. This growing collective awareness of mutual responsibility fits perfectly into the narrative of ESG investing.”
Source Financial Standard