Sustainable and responsible investments (ESG) are now regarded as ‘safe havens’ by the majority of investors, according to deVere Group, one of the world’s leading independent financial advisory and fintech organisations.
Internal studies show that 56% of clients who seek to include environmental, social and governance-orientated investments into their portfolios do so citing that such sustainable funds offer financial protection in times of uncertainty.
A safe-haven asset is a financial instrument that is expected to retain, or even gain value during periods of economic downturn.
“There’s been a massive surge from clients this year looking for ESG investments,” said Nigel Green, deVere Group’s CEO and founder, adding that, “more than a quarter of all clients are currently considering or are already actively engaged in responsible, impactful and sustainable investing.
“It’s a phenomenon that’s particularly prevalent with millennials, with eight out of ten putting ESG credentials at the heart of their investment decision-making process.”
Green explained that what is interesting are the reasons why investors are seeking ESG in the first place.
“The global public health crisis has acted as a wake-up call in many respects. It has prompted a growing collective awareness of mutual responsibility that fits perfectly into the narrative of ESG investing.
“But what’s most surprising is that the majority [56%] also now say that they perceive ESG investments as the new safe-haven asset class. As such, they are increasing their exposure to such funds in a way that traditionally they would have done with, say, gold or U.S. government bonds.”
Green added that all the latest research underscores that the majority of environmental, social and governance investments have outperformed their non-sustainable counterparts this year and have had lower volatility.
“This cannot be ignored by retail – and increasingly institutional – investors who are looking for resilience in these highly unusual times of this new era.”
The deVere CEO had said in earlier comments that the trend for ESG is only likely to intensify as millennials, who are statistically more likely to seek responsible investment options, become the major beneficiaries of the largest intergenerational transfer of wealth – an estimated $30 trln in the next few years – meaning we can expect both retail and institutional investors to continue to pile into ESG.
Green concluded: “The data shows that the view held by traditionalists who claim ESG investments are ‘nice to have’ but not ‘a need to have,’ falls apart under scrutiny in the virus-driven global economic downturn.
“And whilst this short time frame is not determinative, those investors citing ESG’s safe-haven credentials are, for now at least, being proven right.”