(August 2020)
One of the few bright spots in the general bleakness of the COVID pandemic is likely to be ESG. At first dismissed for years, and even now occasionally looked down upon despite having $1 tn in assets, the ESG sector is getting fresh attention because of the pandemic. According to JP Morgan, COVID is serving as a catalyst for ESG because the pandemic is acting as a “wake-up call” about ecological risks. The banks says policymakers and investors are drawing parallels “between the unforeseen risks of a pandemic and issues such as climate change”. The bank continued “Over the long run, COVID-19 could prove to be a major turning point for ESG investing, or strategies that consider a company‚’s environmental, social and governance performance”. Some consider the focus on ESG odd because it runs counterintuitive to the prevailing understanding of investor behavior in times of crisis: a general focus on short-term and economic issues. Nonetheless, ESG has been performing very well on both a return basis and inflows basis.
Source: https://www.jpmorgan.com/global/research/covid-19-esg-investing
(New York)
FINSUM + Magnifi: ESG is growing very quickly, and ESG principles will soon be in effect on 44% of global AUM. The more common ESG gets, the more it will dictate returns, so the growing market focus will likely be beneficial for those who get into ESG funds sooner rather than later. Plus, ESG equities outperformed benchmarks during the pandemic so far.
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