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Earth Day 2024: Why 80% of investors now choose ESG 

At Moneyfarm, we believe that investing in environmentally sustainable companies and sectors is an important long-term strategy, not only for environmental reasons but for financial ones as well. That’s why we offer all our clients a range of portfolios that allow them to invest in social responsibility companies, express a sectorial bias or choose a portfolio that’s tailored to their risk tolerance. That’s why this week we wanted to highlight some research from Deloitte that shows interest in ESG investing is growing.

In the past 5 years, there’s been a significant surge in investors around the world adopting ESG strategies, with 80% now on board compared to only 20% previously. A recent study by Deloitte highlights that investors are primarily motivated by the desire to mitigate sustainability-related risks. The study surveyed over 1,000 asset owners, managers and senior executives.

Over the past 5 years, 80% of interviewed investors across various regions have implemented an ESG strategy, with only 20% having done so over 5 years ago. Additionally, a mere 1% express no intention to develop sustainable investment policies in the future. The key drivers for integrating sustainability into investment decisions include regulatory demands, financial performance enhancement, and growing stakeholder pressure, reflecting heightened awareness of ESG issues.

Investors seek clear, consistent, and evidence-based ESG data, but encounter significant challenges in that data being clear, consistent and reliable. Third-party suppliers and rating agencies provide valuable data for analysing sustainable investment opportunities, alongside certified and verified information from companies’ proprietary systems. Investors emphasise the importance of data control and assurance, underscoring that sustainability marketing alone isn’t sufficient to demonstrate credibility. Regulatory frameworks across jurisdictions, though still evolving, are seen as crucial for enhancing confidence in companies’ ESG data by promoting consistency and standardisation in sustainability disclosures.

What actions can firms take to gain investor confidence?

To foster investor trust in disclosed information and enhance access to capital markets while contributing to societal benefits, companies can take proactive steps before comprehensive regulations are in place. The study suggest four key actions:

  1. Strengthen sustainable governance capabilities by enhancing coordination among executives, recognising the crucial roles each leader plays in achieving ESG objectives.
  2. Invest in sustainability measurement, reporting systems, and compliance solutions to ensure robust disclosures, thereby bolstering transparency.
  3. Confirm sustainability disclosures with third-party assurances, providing investors with verified and reliable information, which is increasingly valued and trusted.
  4. Implement continuous investor engagement to encourage participation, address concerns, and promote transparency and accountability, fostering a collaborative approach between companies and investors.

Interested in sustainable investing?

You can invest in our socially responsible portfolios (ESG), which comprise a mix of globally diversified assets and consist of ETFs investing in companies that adhere to social, environmental and governance sustainability criteria.

You can learn more about our range of ESG portfolios here or why not book an appointment with one of our team? They’ll be happy to help walk you through your options and find an investment solution that suits your unique style.

 

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