The coronavirus pandemic and its economic fallout will trigger a ‘skyward surge’ in sustainable investing over the next 12 months, according to one of the world’s biggest independent financial advisory organisations.
Nigel Green, CEO of the deVere Group – which has more than $12 billion (£9.8 billion) of assets under management – said: “ESG [Environmental, Social and Governance] investing was already going to reshape the investment landscape in this new decade. But the coronavirus will quicken the pace of this reshaping.
“Investors are increasingly aware that it is possible – and increasingly necessary – to make a profit while positively and proactively protecting people and the planet.”
His comments come as new analysis from Bloomberg reveals the average ESG fund loss is just HALF that registered by the S&P (Standard and Poor) 500 Index over the same period during the Covid-19 crisis.
Mr Green said the new analysis points to sustainable, responsible and impactful funds experiencing lower volatility in the long run. He predicts that the coronavirus pandemic will trigger a ‘skyward surge’ in sustainable, responsible and impactful investing over the next 12 months for three key reasons.
“First, before the pandemic, research has revealed that investments that score well in terms of ESG credentials often outperform the market and have lower volatility over the long-run,” he said: “Since the Covid-19 public health emergency up-ended the world, the latest broad analysis shows that ESG funds have typically continued to outperform others.”
Secondly, he added, the coronavirus pandemic has brought the vulnerability and fragility of societies and the planet to the forefront of people’s minds.
He said: “It has underscored that increasingly companies will only survive and thrive if they operate with a nod from the wider court of public approval.
“It has underscored the complexity and interconnectedness of our world in terms of demand and supply, in trade and commerce – and how these can be under threat if not sustainable.”
Third, he said, is a demographic shift where millennials – those who were born from the early 1980s to early 2000s – put ethical considerations as their top priority when it comes to investing.
He said: “This is crucial because the biggest-ever generational transfer of wealth – likely to be around $30 trillion (£24.5 trillion) – from baby boomers to millennials will take place in the next few years.”
A global survey carried out by the deVere Group in January revealed 77 per cent of millennials said that ESG investing was their top priority when considering investment opportunities.
The report highlighted that while traditional factors – such as anticipated returns (10 per cent) and past performance (7 per cent) – are important in millennials’ decision-making, they are no longer enough by themselves.
“As such, they will be making investment decisions after measuring the sustainability and societal impact of a sector or company as these criteria help to better determine their future financial performance, or in other words their risk and return.”