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Why every investor should now include ESG

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Every investor needs exposure to environmental, social and governance (ESG) investments to build wealth over the long-term, according to the CEO of one of the world’s leading financial advisory and fintech firms.

Surveys suggest that global sustainable fund assets almost doubled in the six months to September.

Global ESG assets are on track to exceed $53 trln by 2025, according to Bloomberg Intelligence, representing more than a third of the $140.5 trln in projected total assets under management.

“In January 2020, we identified that ESG would be this decade’s ultimate investment megatrend,” said deVere Group’s Nigel Green, a long-term advocate of impactful investing.

“Of course, that was before the pandemic that has acted as a catalyst for the sustainable investing boom.

“The health of our planet and how it affects human health which, in turn, affects the way we all live, interact and do business, dramatically came to the fore,” Green said.

He explained that previously, ESG investments were often considered a ‘quirk’ or ‘nice to have’.

But now, they should be a part of everyone’s investment portfolio for several key reasons.

“First, they typically deliver a legitimate diversification tool – which is how investors can seize opportunities and mitigate risk, especially during periods of higher volatility,” said Green.

“Second, funds investing in entities with robust ESG credentials have outperformed their benchmarks over recent years. From a risk management point of view, including these companies in your portfolio is, clearly, a sensible decision to take.

“Third, ESG represents a revolution of investment strategy itself. A seismic shift has occurred in corporate behaviour. How firms approach ESG factors and the value they place on them compared to other considerations has already changed forever.”

The deVere CEO added that the ESG themes are already embedded in the global economy as this is only set to grow in the years to come – and, of course, investors should embrace the concept of having early advantage.

 

Moral obligation

“And fourth, the last 18 months have underscored how we have a moral obligation to back and fund entities that support the wellbeing of the planet and society.”

In October, deVere announced that it will double its commitment to position $2 bln of assets under advisement into ESG investments.

This follows a similar announcement earlier this year when it said it would aim to have $1 bln in socially responsible investment vehicles within five years.

As well as its commitment, deVere is one of 18 founding signatories of the UN-backed Net Zero initiative, the international alliance of finance powerhouses that will help accelerate the transition to a net-zero financial system. Its membership means it is committed to aligning all relevant products and services to achieve net-zero greenhouse gases by 2050 and to set meaningful interim targets for 2025.

Other founding signatories include BDO, Bloomberg, Campbell Lutyens, Deloitte, EY, Grant Thornton, KPMG, The London Stock Exchange Group, Minerva Analytics, Moody’s, Morningstar, MSCI, PwC, SGX, Solactive, S&P Global and SSE.

Green concluded that the case for now having exposure to ESG in a investment portfolio is undeniable.

“A failure not to seek profits with purpose could negatively impact your long-term accumulation of wealth.”